SEC Staff Issues FAQs on Activities of Non-U.S. Broker-Dealers
The staff of the SEC’s Division of Trading and Markets has provided answers to frequently asked questions about Exchange Act Rule 15a-6, which offers an exemption from broker-dealer registration for non-U.S. BDs engaged in limited activities. The Rule does not require non-U.S. BDs to register so long as their activities are limited to effecting unsolicited transactions, providing research reports to institutional investors, acting through a U.S. “chaperoning” broker-dealer, and certain other intermediary transactions. The FAQs clarify the following: (i) the Nine Firms No-Action Letter (issued to nine firms in 1996-97) remains valid for interpreting Rule 15a-6; (ii) a foreign BD can effect transactions with a foreign person temporarily in the U.S. so long as the firm had a bona fide pre-existing relationship with such person; (iii) a foreign BD can issue confirmations, account statements, and prospectuses to U.S. investors but cannot send advertising; (iv) a foreign BD may send research reports to U.S. institutional investors; and (v) a chaperoning firm’s regulatory obligations.
OUR TAKE: The FAQs are most applicable for U.S. firms with non-U.S. broker-dealer affiliates involved with executing non-U.S. securities transactions.