What is a Broker-Dealer? - Davis Polk & Wardwell

What Is a Broker-Dealer? § 1A:7.2
coextensive with the commercial paper exemption in section 3(a)(3) of
the Securities Act. 350
The term “commercial paper” is not defined in either the Exchange
Act or the Securities Act. The commercial paper exemption under the
Securities Act has been interpreted to apply only to “prime quality
negotiable commercial paper.” 351 The SEC has relied on several factors
to determine whether commercial paper is of “prime quality,” including:
(i) the financial strength of the issuer; (ii) support of the commercial
paper by a form of credit enhancement; or (iii) rating of the
commercial paper by a rating agency. 352
§ 1A:7.2 Foreign Broker-Dealers Operating under
Rule 15a-6
[A] Background
[A][1] Pre-Rule 15a-6 Precedents
Section 15(a)(1) of the Exchange Act requires registration of any
broker or dealer who makes use of means or instrumentality of
interstate commerce to effect securities transactions. 353 The definitions
of “broker” and “dealer” include “any person” regardless of their
citizenship or location. 354 The term “interstate commerce” is defined
in section 3(a)(17) of the Exchange Act as “trade, commerce, transportation,
or communication among the several States, or between
any foreign country and any State, or between any State and any place
or ship outside thereof.” 355 Therefore, virtually any transactionoriented
contact between a foreign broker-dealer and an investor in
the United States involves interstate commerce and could provide the
jurisdictional basis for broker-dealer registration. 356
350. Compare 15 U.S.C. § 77c(a)(3), with 15 U.S.C. 78c(a)(10). See Zeller v.
Bogue Elec. Mfg. Corp., 476 F.2d 795 (2d. Cir. 1973); SEC v. Continental
Commodities Corp., 497 F.2d 516 (5th Cir. 1974); see also SEC Release
No. 33-4412 (Sept. 20, 1961).
351. See SEC Release No. 33-4412; UBS Asset Mgmt. (New York) Inc. and The
Chase Manhattan Bank v. Wood Gundy Corp., 914 F. Supp. 66 (S.D.N.Y.,
1996); Sanders v. John Nuveen & Co., 463 F.2d 1075, 1079 (7th Cir.), cert.
denied, 409 U.S. 1009 (1972).
352. See Mercury Finance Company, SEC No-Action Letter (Feb. 21, 1989);
Russell Corp., SEC No-Action Letter (Sept. 22, 1988); Imperial Savs.
Assn., SEC No-Action Letter (Sept. 21, 1988).
353. Exchange Act § 15(a)(1).
354. Exchange Act §§ 3(a)(4)(A) and 3(a)(5)(A).
355. Exchange Act § 3(a)(17).
356. See Rule 15a-6 Adopting Release, supra note 28, at n.20.
(Broker-Dealer Reg., Rel. #9, 9/10)
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