Securities Lawyer 101 l Brenda Hamilton

Securities Lawyer 101 l Brenda Hamilton

Monday, April 7, 2014

Regulation S l Foreign Private Issuers

Foreign private issuers are able to raise capital in the U.S. by registering an offering registered on aregistration statement under the Securities Act of 1933, as amended (the “Securities Act”) or by selling securities that are exempt from the SEC’s registration requirements.
Regulation D of the Securities Act as well as Regulation S can be used by foreign companies going public to obtain the seed shareholders required by FINRA.
Offshore Sales l Regulation S Offerings l Foreign Issuers
Regulation S provides a securities exemption for  offers and sales of securities that occur outside the U.S. Regulation S like Regulation D contains a non-exclusive safe harbor for extraterritorial offers, sales, and resales of securities in Rules 903 and 904 under the Securities Act. If a foreign private issuer’s offering fails to comply with the requirements of Regulation S,  the issuer may rely upon other exemptions from registration.  Securities may also be offered and sold outside the U.S.  pursuant to Regulation S at the same time as those offered and sold pursuant to Regulation D. In such cases, the number of purchasers and the total proceeds raised pursuant to Regulation S are not integrated with those in Regulation D in calculating Regulation D’s offering requirements.
The structure of Regulation S consists of General Conditions applicable to any offshore transaction, followed by an Issuer Safe Harbor and a Resale Safe Harbor.

Regulation S l General Conditions l Foreign Private Issuers

In general, an offering may qualify for non-registration pursuant to Regulation S if it meets two conditions:
● The offer or sale is made in an “offshore transaction”; and
● There are no “directed selling efforts” in the United States.
An Offshore Transaction is defined as one in which:
● The offer is not made to a person in the United States; and   Either:
●  At the time the buy order is originated, the buyer is outside the United States, or the seller and any person acting on the seller’s behalf reasonably believe that the buyer is outside the United States; or
Directed Selling Efforts means any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the securities being offered in reliance on Regulation S, including placing an advertisement in a publication “with a general circulation in the United States” that refers to the offering of securities being made in reliance upon Regulation S.
Issuer Safe Harbor l Regulation S l Foreign Private Issuers
For the purposes of the issuer safe harbor, the transaction is executed in, on or through a physical trading floor of an established foreign securities exchange that is located outside the United States; or
The safe harbor of Regulation S contains three categories of offerings, based on the nationality and reporting status of the foreign private issuer, and degree of U.S. market interest in its securities. The three categories have varying levels of procedural safeguards imposed which are designed to assure that the securities offered pursuant to a Regulation S offering are not part of an unregistered distribution of securities in the United States.

Category 1 l Regulation S Safe Harbor

The first issuer safe harbor under Regulation S contains the least restrictive conditions and is for offerings of securities of foreign companies with no substantial U.S. market interest in their securities, securities offered and sold in overseas directed offerings, securities backed by the full faith and credit of a foreign government, and securities offered and sold pursuant to certain employee benefit plans. For offerings in this category, there are no requirements other than the Regulation S

Category 2 l Regulation S Safe Harbor

The second issuer safe harbor under Regulation S applies to offerings that are not eligible for Category 1 and are equity securities of a reporting foreign company, or debt securities of a reporting issuer (either foreign or U.S. domestic) or a non-reporting foreign company. In addition to the Regulation S General Conditions, certain other offering restrictions apply and no offer or sale may be made to a U.S. person or for the account or benefit of a U.S. person (other than a distributor) for a period of 40 days.

Category 3 l Regulation S Safe Harbor

The third issuer safe harbor under Regulation S contains the most restrictive conditions and applies to all securities not eligible for Categories 1 and 2. This includes equity securities of a reporting U.S. domestic issuer, any securities of a non-reporting U.S. domestic issuer, and equity securities of a non-reporting foreign company that has a substantial U.S. market interest in its equity securities. In addition to the Regulation S General Conditions, certain other offering restrictions apply and no offer or sale may be made to a U.S. person or for the account or benefit of a U.S. person (other than a distributor) for the following periods:
● Equity securities of non-reporting issuers: one year
● Equity securities of reporting issuers: six months
● Debt securities: 40 days
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton Florida, (561) 416-8956, by email at info@securitieslawyer101.com or visit www.gopublic101.com.   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information about going public and the rules and regulations affecting the use of Rule 144, Form 8K, crowdfunding, FINRA Rule 6490Rule 506 private placement offerings and memorandums, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration statements on Form S-1 IPO’s, OTC Pink Sheet listings, Form 10 OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, direct public offerings and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or info@securitieslawyer101.com. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.GoPublic101.com

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