WSR 97-13-077

PROPOSED RULES

DEPARTMENT OF

FINANCIAL INSTITUTIONS

(Securities Division)

[Filed June 18, 1997, 9:41 a.m.]

Original Notice.

Preproposal statement of inquiry was filed as WSR 97-08-056.

Title of Rule: World class foreign issuer exemption.

Purpose: Provide an exemption from registration for substantial foreign issuers that might otherwise have to register. Domestic issuers of similar financial standing would typically qualify for an exemption from registration.

Other Identifying Information: WAC 460-42A-082.

Statutory Authority for Adoption: RCW 21.20.450.

Statute Being Implemented: Chapter 21.20 RCW.

Summary: The proposed provision would provide an exemption from registration for certain foreign issuers with a public float of $1 billion, a market value of all equity shares of $3 billion, and whose securities trade on an SEC-recognized foreign securities exchange.

Reasons Supporting Proposal: Absent this exemption, these substantial foreign issuers might have to register. Domestic issuers of similar financial standing would typically qualify for an exemption from registration. This proposal is consistent with the North American Securities Administrators Association (NASAA) statement of policy regarding world class foreign issuers.

Name of Agency Personnel Responsible for Drafting: William M. Beatty, 210 11th Avenue S.W., Olympia, (360) 902-8760; Implementation: John L. Bley, 210 11th Avenue S.W., Olympia, (360) 902-8760; and Enforcement: Deborah R. Bortner, 210 11th Avenue S.W., Olympia, (360) 902-8760.

Name of Proponent: Securities Division, Department of Financial Institutions, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: The proposed provision would provide an exemption from registration for certain foreign issuers with a public float of $1 billion, a market value of all equity shares of $3 billion, and whose securities trade on an SEC-recognized foreign securities exchange. Absent this exemption, these substantial foreign issuers might have to register. Domestic issuers of similar financial standing would typically qualify for an exemption from registration. This proposal is consistent with the North American Securities Administrators Association (NASAA) statement of policy regarding world class foreign issuers.

Proposal does not change existing rules. This is a new provision.

No small business economic impact statement has been prepared under chapter 19.85 RCW. The proposal does not impose additional costs on business.

Section 201, chapter 403, Laws of 1995, does not apply to this rule adoption. The Department of Financial Institutions is not one of the agencies listed in section 201.

Hearing Location: Department of Financial Institutions, Securities Division, Executive Conference Room, 300 General Administration Building, 210 11th Avenue S.W., Olympia, WA 98504, on July 23, 1997, at 1:00 p.m.

Assistance for Persons with Disabilities: Contact Darlene Christianson by July 21, 1997, TDD (360) 664-8126, or (360) 902-8760.

Submit Written Comments to: Bill Beatty, P.O. Box 9033, Olympia, WA 98507-9033, FAX (360) 586-5068, by July 22, 1997.

Date of Intended Adoption: July 30, 1997.

June 17, 1997

John L. Bley

Director

NEW SECTION

WAC 460-42A-082 World class foreign issuer exemption. (1) Any security meeting all of the following conditions is exempted under RCW 21.20.310(8):

(a) The securities are:

(i) Equity securities except options, warrants, preferred stock, subscription rights, securities convertible into equity securities or any right to subscribe to or purchase such options, warrants, convertible securities or preferred stock;

(ii) Units consisting of equity securities permitted by (a)(i) of this subsection and warrants to purchase the same equity security being offered in the unit;

(iii) Nonconvertible debt securities that are rated in one of the four highest rating categories of Standard and Poor's, Moody's, Dominion Bond Rating Services of Canadian Bond Rating Services or such other rating organization which the administrator by rule or order may designate. For purposes of this subsection (1)(a)(iii) of this section, nonconvertible debt securities means securities that cannot be converted for at least one year from the date of issuance and then only into equity shares of the issuer or its parent; or

(iv) American Depository receipt representing securities described in (a)(i), (ii) or (iii) of this subsection.

(b) The issuer is not organized under the laws of the United States, or of any state, territory or possession of the United States, or of the District of Columbia or Puerto Rico.

(c) The issuer, at the time an offer or sale is made under this subsection, has been a going concern engaged in continuous business operations for the immediate past five years and during that period, has not been the subject of a proceeding relating to insolvency, bankruptcy, involuntary administration, receivership or similar proceeding. For purposes of this subsection (1)(c) of this section, the operating history of any predecessor that represented more than fifty percent of the value of the assets of the issuer that otherwise would have met the conditions of this section may be used toward the five year requirement.

(d) The issuer, at the time an offer or sale is made under this subsection (1)(d) of this section, has public float of one billion dollars (United States) or more.

(e) The market value of the issuer's equity shares, at the time an offer or sale is made under this subsection, is three billion dollars (United States) or more.

(f) The issuer, at the time an offer or sale is made under this subsection (1)(f) of this section, has a class of equity securities listed for trading on or through the facilities of a foreign securities exchange or recognized foreign securities market included in Rule 902 (a)(1) or successor rule promulgated under the Securities Act of 1933 or designated by the U.S. Securities and Exchange Commission under Rule 902 (a)(2) promulgated under the Securities Act of 1933.

(2) For purposes of this section:

(a) "Public float" means the market value of all outstanding equity shares owned by nonaffiliates.

(b) "Equity shares" means common shares, nonvoting equity shares and subordinate or restricted voting equity shares, but does not include preferred shares.

(c) An "affiliate" of a person is anyone who beneficially owns, directly or indirectly, or exercises control or direction over, more than ten percent of the outstanding equity shares of such person.

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