Series 63: 2.1.2.2. Exceptions For Certain Foreign Broker-Dealers

Taken from our Series 63 Online Guide

2.1.2.2. Exceptions for Certain Foreign Broker-Dealers

The Securities Exchange Act of 1934 also provides conditional exemptions from registration for foreign broker-dealers that engage in certain specified activities involving U.S. investors. A foreign broker-dealer is defined by the SEC as any non-U.S. resident ‘person’ that is not an office or branch of or a natural person associated with a registered broker-dealer and whose securities activities would otherwise qualify the ‘person’ as a broker or a dealer. Basically, if they are outside the U.S., not affiliated with registered broker-dealers, and engaged in the business of effecting securities transactions, foreign broker-dealers may be eligible for this exemption.

However, these foreign broker-dealers are only allowed to participate in a handful of specific activities while avoiding registration requirements. These activities include:

Effecting unsolicited securities transactions, meaning transactions that are initiated by the customer

Providing research reports to American institutional investors

Soliciting and effecting transactions with or for most American institutional investors through a registered broker-dealer

Soliciting and effecting transactions directly with or for registered broker-dealers, banks serving as broker-dealers, certain international organizations, foreign persons temporarily present in the U.S., American citizens resident outside the U.S., and agencies or branches of U.S. persons permanently located outside of the U.S.

SUMMARY TABLE

Entities that Do Not Need to Register with the State as Broker-Dealers

Is Not a Broker-Dealer

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