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

What Is a Broker-Dealer? § 1A:7.2
with U.S. resident fiduciaries 396 for “offshore clients” 397 without the
U.S.-affiliated foreign broker-dealers either registering as brokerdealers
or effecting the transactions under Rule 15a-6, provided that:
(i) the U.S.-affiliated foreign broker-dealers will obtain written
assurance from the U.S. resident fiduciary that the account is
managed for an “offshore client”;
(ii) transactions with U.S. resident fiduciaries for offshore clients,
other than transactions in foreign securities, will be effected in
compliance with the requirements of either section 15(a) of
the Exchange Act or Rule 15a-6 thereunder; and
(iii) transactions effected with U.S. resident fiduciaries, other than
transactions for offshore clients, will be effected in compliance
with the requirements of either section 15(a) of the Exchange
Act or Rule 15a-6 thereunder. 398
[C] Other Cross-Border Issues
In 2000, the SEC published guidance on the use of electric media
by issuers of all types, including operating companies, investment
United States in connection with a distribution conducted outside the
United States. For proposes of this definition, the status of OTC derivatives
that are securities would be determined by reference to the underlying
instrument. A distribution would not be considered to be conducted
“outside the United States” if it involved a registration statement filed
under the Securities Act, but may be considered conducted outside the
United States, notwithstanding U.S. sales pursuant to Section 4(2) of the
Securities Act or a resale exemption from the Securities Act registration
requirement, including the exemption provided by Rule 144A. See Cleary,
Gottlieb, Steen & Hamilton, SEC No-Action Letter (Jan. 30, 1996) [hereinafter
Offshore Client Letter].
396. A “U.S. resident fiduciary” cannot be a registered broker-dealer or a bank
acting in a broker-dealer capacity within the meaning of Rule 15a-6(a)(4)(i).
A U.S. resident fiduciary may, but need not, be (i) affiliated with a U.S. or
foreign broker-dealer, or (ii) registered under the Investment Advisers Act.
See Offshore Client Letter, supra note 395.
397. “Offshore client” is defined in the letter as (i) any entity not organized or
incorporated under the laws of the United States and not engaged in a
trade or business in the United States for U.S. federal income tax purposes,
(ii) any natural person who is neither a U.S. citizen nor a U.S. resident,
(iii) a natural person who is a U.S. citizen residing in a foreign country who
(1) has $500,000 or more under the management of the U.S. resident
fiduciary or (2) has, together with the person’s spouse, a net worth in
excess of one million dollars, or (iv) an entity not organized or incorporated
under the laws of the United States substantially all of the outstanding
voting securities of which are beneficially owned by the foregoing persons.
See Offshore Client Letter, supra note 395.
398. See Offshore Client Letter, supra note 395.
(Broker-Dealer Reg., Rel. #9, 9/10)
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