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 |
|