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

§ 1A:7.2 BROKER-DEALER REGULATION
“without the jurisdiction of the United States” in section 30(b) does
not refer to territorial limits of this country, and a broker-dealer
operating outside the physical boundaries of the United States, but
using the U.S. mails, wires, or telephone lines to trade securities with
U.S. persons located in this country, would not be, in the words of
section 30(b), transacting a business in securities without the jurisdiction
of the United States. 370
The SEC also takes the view that, in the absence of some available
registration exemption, solicitation of securities business from within
the United States is an activity requiring broker-dealer registration,
even if the investors being solicited are exclusively foreign persons
physically located outside the United States. 371
The U.S. Supreme Court recently held that the antifraud provisions
under section 10(b) of the Exchange Act apply only with respect to
(i) the purchase or sale of a security listed on a U.S. stock exchange, or
(ii) the purchase or sale of any other security in the United States. 372 It is
unclear at present how the holding in this case might be extended to
the broker-dealer registration context.
Finally, it should be noted that the derivatives title of Dodd-Frank
amends section 30 of the Exchange Act to add the following:
(c) No provision of this title that was added by the Wall Street
Transparency and Accountability Act of 2010, or any rule or
regulation thereunder, shall apply to any person insofar as
such person transacts a business in security-based swaps without
the jurisdiction of the United States, unless such person
transacts such business in contravention of such rules and
regulations as the Commission may prescribe as necessary
or appropriate to prevent the evasion of any provision of this
title that was added by the Wall Street Transparency and
Accountability Act of 2010. This subsection shall not be construed
to limit the jurisdiction of the Commission under any
provision of this title, as in effect prior to the date of enactment
of the Wall Street Transparency and Accountability Act of
2010. 373
At the present time, the full extraterritorial reach of Dodd-Frank
remains unclear.
370. See Rule 15a-6 Adopting Release, supra note 28, at 13.
371. See, e.g., Dilworth Capital Management LLC, SEC Denial of No-Action
Request (Dec. 9, 2004).
372. Morrison v. Nat’l Australia Bank Ltd., 561 U.S. ___, slip op. No. 08-1191
(June 24, 2010).
373. Exchange Act § 30, as amended by Dodd-Frank § 772.
1A–84