SEC Rule 15a-6

"The Commission's goals in adopting Rule 15a6 at this time are (i) to facilitate access lo foreign markets by U.S. institutional investors through foreign broker-dealers and the research that they provide, consistent with maintaining the safeguards afforded by broker-dealer registration; and (ii) to provide clear guidance to foreign broker-dealers seeking to operate in compliance with U.S. broker-dealer registration requirements."

"If foreign broker-dealers are effecting trades outside the United States with or for individual US. citizens resident abroad, but have no other contacts within the jurisdiction of the United States, the Commission generally would not expect these foreign broker-dealers to register."

"Flnally, paragraph (a)(3)(iii) of the Rule requires the use of a registered broker-dealer as an intermediary in effecting trades between U.S. institutional investors or major U.S. institutional investors and the foreign broker-dealer as a condition for this exemption. Paragraph (a)(3)(iii)(A) first requires that transactions with these investors be effected through the registered broker-dealer. This means that the registered broker-dealer must handle all aspects of these transactions except the negotiation of their terms, which may occur between the investors and the foreign broker-dealer (through its foreign associated persons).

Paragraph (a)(3)(iii)(A) requires the registered broker-dealer through which transactions with these investors are effected to be responsible for carrying on specified functions, so as to make the performance of these functions subject to direct Commission oversight. The registered broker-dealer must issue all required confirmations and account statements to the investors. These documents are significant points of contact between the investor and the broker-dealer, and they provide important information. Also, as between the foreign broker-dealer and the registered broker-dealer, the latter is required to extend or arrange for the extension of any credit to these investors in connection with the purchase of securities. In addition, the registered broker-dealer is responsible for maintaining required books and records relating to the transactions conducted under paragraph (a)(3) of the Rule, including those required by Rules 17a-3 and 17a-4, which facililates Commission supervision and investigation of these transactions.

- Federal Register Guidance

See also

• FAQ on Rule 15a-6
• SEC Page on Rule 15a-6
• Federal Register Guidance

Sayeth Dorsey & Witney:

Rule 15a-6, as supplemented by SEC no-action letters, can be used, at the federal level, to permit contacts by representatives of a Canadian firm with “U.S. Institutional Investors” and “Major U.S. Institutional Investors” (as defined in each case) if the account is maintained by a U.S. registered broker-dealer (which can either be affiliated or unaffiliated with the Foreign firm).

Non-U.S. dealers, including foreign affiliates of U.S. dealers, should also limit their contacts to institutional investors and registered broker-dealers, thereby benefiting from state broker-dealer registration exemptions.

U.S. Institutional Investors are defined in material part as (i) registered investment companies, (ii) banks, (iii) savings and loan associations, (iv) insurance companies, (v) pension plans directed by defined fiduciaries, (vi) tax-exempt entities, and (vii) trusts with sophisticated fiduciaries with total assets in excess of $5 million.

Major U.S. Institutional Investors are entities, regardless of whether they fall in the foregoing categories, with assets or assets under management in excess of $100 million.

The functions required to be performed by the U.S. dealer in the case of U.S. Institutional Investors and Major U.S. Institutional Investors areas follows:

(a) Issue all required confirmations and account statements;

(b) Maintain required capital related to such transactions;

(c) Receive, deliver and safeguard funds and securities on behalf of the customer;

(d) Maintain required books and records related to the transaction;