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

What Is a Broker-Dealer? § 1A:7.2
(vii) obtain consents to service of process from the foreign brokerdealer
and its foreign associated persons 389 who participate in
the solicitation of U.S. investors under Rule 15a-6(a)(3) and
procure certain other information and ensure that such persons
are not subject to “statutory disqualifications.” 390
Rule 15a-6(a)(3) requires that all activities of the foreign brokerdealer
be conducted from outside the United States (though it permits
U.S. visits up to thirty days per year, subject to certain conditions), and
that certain contacts between personnel of the foreign broker-dealer
and U.S. investors be “chaperoned” by associated persons of a Registered
Broker-Dealer. 391 In addition, the foreign broker-dealer must
provide the SEC (upon request or pursuant to agreements between
the SEC and the foreign securities authority) with any information or
documents within its possession, subject to exceptions. 392
[B][5] Rule 15a-6(a)(4)
Rule 15a-6(a)(4) allows foreign broker-dealers to solicit and otherwise
deal with certain persons without the involvement of a Registered
Broker-Dealer. These persons include:
389. Rule 15a-6 Adopting Release, supra note 28, at 87; “Foreign associated
person” is defined in Rule 15a-6(b)(2) to mean “any natural person
domiciled outside the United States who is an associated person, as
defined in Section 3(a)(18) of the [Exchange] Act, of the foreign broker or
dealer, and who participates in the solicitation of a U.S. institutional
investor or a major U.S. institutional investor under paragraph (a)(3) of
this section.” Rule 15a-6(b)(2).
390. Rule 15a-6(a)(3)(ii).
391. Associated persons of the registered broker-dealer must participate in
(“chaperone”) all oral communications between the foreign broker-dealer
and the U.S. institutional investor. Communications with a major U.S.
institutional investor do not have to be chaperoned. In 1997, the SEC
liberalized the “chaperoning” requirements by granting no-action relief
that would permit foreign associated persons of a U.S.-affiliated foreign
broker-dealer, without the participation of an associated person of a
registered broker-dealer, to (i) engage in oral communications from outside
the U.S. with U.S institutional investors (that do not qualify as major U.S.
institutional investors) where such communications take place outside of
the trading hours of the New York Stock Exchange, as long as the foreign
associated persons do not accept orders to effect transactions other than
those involving foreign securities, and (ii) have in-person contacts during
visits to the United States with major U.S. institutional investors (as such
definition is expanded by the letter), so long as the number of days on
which such in-person contacts occur does not exceed 30 per year and the
foreign associated persons engaged in such in-person contacts do not
accept orders to effect securities transactions while in the United States.
See Nine Firms Letter, supra note 382.
392. Rule 15a-6(a)(3)(i)(B).
(Broker-Dealer Reg., Rel. #9, 9/10)
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