Closing the loopholes in US regulation S for offshore offers and sales of securities
| DOI | https://doi.org/10.1108/eb024933 |
| Pages | 249-259 |
| Published date | 01 March 1997 |
| Date | 01 March 1997 |
| Author | Dana L. Platt,Mark J. McKeefry |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 5 Number 3
Closing the loopholes
in
US regulation
S for
offshore offers and sales
of
securities
Dana
L.
Platt and Mark
J.
McKeefry
Received:
21st
April,
1997
Kirkpatrick
&
Lockhart LLP, 1251 Avenue
of
the Americas, 45th Floor, New York, New York 10020-
1104;
tel: 212 536 3900; fax: 212 536 3901
Dana
L.
Platt
is a
partner
at
Kirkpatrick
&
Lockhart
LLP in New
York.
She
received
her J.D. from
the
University
of
Virginia
in
1980
and has
been associated with
the
firm since 1987.
Her
practice principally
includes investment companies, invest-
ment advisers, and international securities
transactions.
Mark
J.
McKeefry
is an
associate
at
Kirk-
patrick
&
Lockhart LLP.
He
received
his
J.D. from Fordham University
in
1997.
ABSTRACT
The United States Securities
and
Exchange
Commission adopted Regulation
S in
1990
to
clarify that offshore offers and sales
of
securities
need
not
comply with
the
onerous registration
requirements
of US
securities
laws.
In
the short
time since Regulation
S
was adopted,
a
number
of
issuers
have abused
the
regulation.
Amend-
ments designed
to
curb these abuses have been
recently proposed. This paper addresses
the
impact
of
the amendments and identifies signifi-
cant issues to
consider
when undertaking
a
Reg-
ulation
S
transaction.
INTRODUCTION
Fuelled
by
pressures from investors seeking
to diversify their portfolios
and
obtain
higher returns
by
investing 'offshore'
and
from issuers seeking
to
obtain inexpensive
capital,
the
world's securities markets have
become increasingly linked.
The
United
States Securities
and
Exchange Commission
(SEC) recognises that many foreign issuers
could
not
satisfy
the
requirements under
the Securities
Act of
1933 (Securities
Act)
for offering their shares
in the USA
(parti-
cularly
the
requirement that
the
issuer's
financial statements
be
prepared
in
confor-
mity with
US
generally accepted account-
ing principles)
and
that even sophisticated
institutional
US
investors would
be
pre-
cluded from purchasing
the
securities
of
these issuers
in an
initial
or
secondary offer-
ing.
To
ensure that
the USA
would
be an
important player
in the
development
of a
fair
and
efficient global market,1
the SEC
adopted Regulation
S in
1990.2 Regulation
S provides
a
channel
for
both
US and
for-
eign issuers
to
raise capital
in
placements
of
their securities outside
the
territorial
boundaries
of
the
USA
without having
to
comply with
the
Securities
Act and
pro-
vides
a
mechanism
for
sale
and
re-sale
of
these securities
to
certain qualified
US
insti-
tutional
investors.3
During
the
past seven years,
the SEC
has expressed concern about
the
possible
abuse
of
Regulation
S to
constitute,
in
effect,
an
offering
of
securities
in the USA
without compliance with
the
Securities
Act.4
In
October
1996, the SEC
adopted
amendments
to the
Securities Exchange
Act
of
1934 (applicable
to
companies listed
on
a US
exchange, 'reporting companies'),
Journal
of
Financial Regulation
and Compliance, Vol.
5.
No.
3,
1997,
pp. 249-259
© Henry Stewart Publications,
1358-1988
Page 249
To continue reading
Request your trial