Securities Regulation Week 13: International (Lecture Slides)

Securities markets are global. U.S. companies raise money from foreign investors. Foreign companies raise money on U.S. markets. U.S. investors seek diversification and higher yields in foreign markets. Foreign broker-dealers desire to sell securities to U.S. investors. International securities regulation involves three parts or “tranches.” Tranche One is the Corp. Fin. Tranche. There are two parts to the Corp. Fin. Tranche: (1) Regulation S, which provides a registration exemption for securities sold outside the U.S., and (2) American Depositary Receipts (“ADRs”) and other U.S. accommodations for foreign issuers that wish to sell securities inside the U.S. Tranche Two is the Trading and Markets Tranche. This tranche addresses issues such as whether a foreign exchange must register as a U.S. exchange if it places an electronic trading screen on U.S. soil. This tranche also addresses issues concerning whether, and under what conditions, a foreign “bank” (i.e., broker-dealer) that sells securities to U.S. investors must register as a U.S. broker-dealer. SEC Rule 15-6, which provides a limited exemption from U.S. broker-dealer registration for foreign banks, is an important part of this tranche. The Third Tranche is the Enforcement Tranche. This tranche addresses issues concerning when the SEC can enforce U.S. laws abroad or against non-U.S. citizens. Cooperation agreements with foreign regulators (e.g., Memoranda of Understanding or MOUs) come into play in this tranche.