A Free Pass for Foreign Firms? An Assessment of SEC and Private Enforcement Against Foreign Issuers

While proponents of the bonding hypothesis have posited that foreign firms crosslist in the United States to signal compliance with the strict U.S. corporate governance regime, these scholars have taken the enforcement of U.S. securities laws largely for granted. This Note presents an empirical examination of previously unexplored data on the enforcement of U.S. securities laws against foreign issuers. The results suggest that relative to domestic issuers, foreign issuers in the United States have benefited not only from a more lax set of rules, but also from a more forgiving public enforcement agency. At the same time, U.S. courts have limited private enforcement against foreign issuers, thus restricting an alternative to public enforcement and further widening the gap between the corporate governance regime for U.S. issuers and the one for foreign issuers.