Securities Industry Essentials (SIE) ExamOverview of Regulatory FrameworkMedium
A registered representative (RR) is approached by a client who expresses interest in purchasing shares of a publicly traded company that is headquartered in the client's home country, which is outside the United States. The client is a non-U.S. resident and wishes to execute the transaction on the client's domestic exchange. Under which regulation would this transaction generally fall outside of U.S. jurisdiction?
- ARegulation T
- BRegulation D
- CRegulation S
- DRegulation FD
Show answer & explanationAnswer & explanation
Correct answer: C. Regulation S
Regulation S provides an exemption from the registration requirements of the Securities Act of 1933 for offers and sales of securities that occur outside the United States and do not involve U.S. persons. Therefore, a transaction executed by a non-U.S. resident on a foreign exchange for a foreign company would typically fall under Regulation S.
Why the other options are wrong
- A. Regulation T governs the extension of credit by broker-dealers to customers for the purchase of securities.
- B. Regulation D provides exemptions from registration for certain private offerings within the U.S.
- D. Regulation FD (Fair Disclosure) addresses selective disclosure of material nonpublic information by public companies.
Regulation S
Regulation S provides an exemption from the registration requirements of the Securities Act of 1933 for offers and sales of securities occurring outside the United States.
- Applies to offers and sales made outside the U.S.
- Purchasers must be non-U.S. persons.
- No directed selling efforts into the U.S. are permitted.
- Securities sold under Reg S may have resale restrictions.
Memory trick: S for 'Seas' (overseas) and 'Sales' (outside US)