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.