An entity incorporated or organized under the laws of a foreign country is classified as a non-U.S. issuer. However, additional criteria must be met for it to be further designated a specific type of non-U.S. issuer. The classification depends primarily on the concentration of its ownership within the United States, the location of its business operations, and the composition of its management team. For instance, a company incorporated in the United Kingdom, with the majority of its shareholders residing outside the United States and its principal place of business also outside the United States, would likely fall under this designation.
The designation is significant due to its implications for regulatory compliance, particularly concerning securities laws in the United States. Qualifying for this categorization results in reduced reporting obligations to the U.S. Securities and Exchange Commission (SEC) compared to domestic issuers. This reduced burden can lower operational costs and streamline processes, encouraging foreign entities to access U.S. capital markets. The framework was designed, in part, to balance the protection of U.S. investors with the need to promote the attractiveness of the U.S. market for foreign companies.
