Exemption from registration under the Exchange Act
A non-US company establishing an ADR program that is listed on a US securities exchange generally will be required to register with the US Securities and Exchange Commission (SEC) under Section 12(b) of the Exchange Act and become subject to on-going US reporting requirements and laws such as the Sarbanes-Oxley Act. Consequently, Level 2 and Level 3 ADR programs (which are listed on US securities exchanges) must be registered under the Exchange Act. However, because Level 1 ADRs are not listed on a US exchange, they are not required to be registered under Section 12(b) of the Exchange Act.
Nor are Level 1 ADRs required to be registered under Section 12(g) of the Exchange Act so long as the requirements of the Rule 12g3-2(b) exemption are met. In order to be eligible for the Rule 12g3-2b exemption, a non-US issuer (i) must not otherwise have any reporting obligations under Section 13(a) or 15(d) of the Exchange Act; (ii) must currently maintain a listing of its equity securities on one or more exchanges in a foreign jurisdiction that, either singly or together with trading of that class of securities in another foreign jurisdiction, constitutes the primary trading market for those securities; and (iii) must otherwise have published in English, on its Internet Web site or through an electronic information delivery system generally available to the public in its primary trading market, certain specified disclosure documents it is required to make public under applicable non-US laws (e.g., annual and interim reports, proxy materials, certain press releases and public domestic stock exchange filings). For the purposes of the rule, “primary trading market” is defined as at least 55 percent of the worldwide trading in the subject class of securities took place in, on or through the facilities of a securities market or markets in no more than two foreign jurisdictions during the issuer’s most recently completed fiscal year.
Registration under the Securities Act
Although the company’s ADRs in a Level 1 program are exempted from Exchange Act registration pursuant to Rule 12g3-2(b), the Depositary and the company still must register the ADRs under the Securities Act. However, unlike when a company is preparing a Level 2 or Level 3 ADR program, which involves the preparation of a very detailed US prospectus (or similar disclosure document), the registration statement for a Level 1 ADR (so-called Form F-6) is a very brief document which largely consists of the Deposit Agreement and ADR certificate.