6.2.3. Exemptions for Offshore Transactions: Regulation S
Sometimes companies wish to issue securities outside of the U.S. and have no intention of distributing them within the U.S. Issuers of these securities do not need to register them with the SEC because they are eligible for a Regulation S exemption. Regulation S can be used by either U.S. or foreign companies to issue securities that will be bought and sold in only offshore transactions (which does not mean literally offshore but only transactions that occur outside the U.S.; that is, sales that occur in Canada and Mexico are considered offshore). No offers of these securities can be made to people living in the United States. This is true even if the people are citizens of another country living in the U.S. The law states that there can be no “directed selling efforts” in the U.S.
Securities fall under Regulation S if an offer is not made to a person in the United States and at least one of the following is true:
• At the time the buy order is originated, the buyer is outside the U.S. (or the seller and any agent of the seller reasonably believe the buyer to be outside the U.S.).
• In an issuer sale, the transaction is executed on an established foreign securities exchange located outside the U.S.
• In a resale, the sale is executed in a “designated offshore securities market,” which is defined to include a host of recognized foreign stock exchanges.
An issuer can sell Regulation S securities immediately on a foreign exchange, but there are restrictions on when they can be sold to U.S. residents outside the country. Debt securities can be sold to U.S. residents after a 40-day restricted period, and domestic equities can be sold to U.S. residents after a 40-day, 6-month, or 1-year restricted period, depending on the type of issuer.
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SUMMARY TABLE Offerings Exempt from Registration |
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