SEC Issues FAQs Regarding Rule 15a-6 and Foreign Broker-Dealers


Pursuant to Securities and Exchange Commission Rule 15a-6 adopted under the Securities Exchange Act of 1934, certain exemptions from broker-dealer registration are available for foreign broker-dealers that engage in limited activities involving US institutional investors. The SEC’s goals in adopting Rule 15a-6 were to allow these investors to access foreign markets through foreign broker-dealers while maintaining the safeguards afforded by broker-dealer registration. Since the adoption of Rule 15a-6, the SEC has provided guidance on the rule and its application in various no-action letters. In addition, the SEC issued responses to frequently asked questions (FAQs) regarding the application of Regulation AC to research activities of foreign broker-dealers, including foreign broker-dealers that rely on the registration exemption under Rule 15a-6.

On March 21, the SEC issued FAQs with respect to the operation of Rule 15a-6. Although the FAQs do not offer new interpretations, they provide useful clarifications with respect to chaperoning arrangements and other aspects of the Rule 15a-6 exemptions. The Rule 15a-6 FAQs provide clarification with respect to issues related to the “Seven Firms” and “Nine Firms” no-action letters, which addressed when a chaperoning agreement was required and how responsibilities were to be allocated between a chaperoning broker-dealer and the foreign broker-dealer. The FAQs also provide, among other things, clarification with respect to net capital requirements and recordkeeping and transaction confirmation obligations for chaperoning broker-dealers, and their obligations in connection with a foreign broker-dealer’s direct distribution of research to major US institutional investors.

The FAQs are available here.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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