The Securities and Exchange Commission has published proposed rule amendments to increase the range of services foreign broker-dealers are allowed to offer in the United States.
The SEC’s proposals would modify the requirement that any contact by a foreign broker-dealer with a U.S. institution must be chaperoned by a person registered with a U.S. broker-dealer.
“In practice, this chaperoning requirement has proven unwieldy as investors face significant inconvenience caused by differences in time zones and limitations on when investors can be contacted,” says SEC Chairman Christopher Cox. “Further difficulties for U.S. investors arise because U.S. registered personnel have to be available for communications with foreign broker-dealers. Taken together, these limitations seriously hamper the service of U.S. investors, while making them pay for brokerage services twice. They also effectively limit U.S. investors’ access to certain foreign investments.”
In general, the SEC’s proposed amendments would expand and streamline the conditions under which a foreign broker-dealer could operate without triggering the registration, reporting and other requirements of the Exchange Act and related rules that apply to broker-dealers that are not registered with the Commission. Among other things, foreign broker-dealers would continue to be subject to the antifraud provisions of the federal securities laws.
“While the Commission has provided a useful framework for U.S. investors to access foreign broker-dealers for almost two decades, ever increasing market globalisation suggests that it is time to revisit that framework to consider whether it could be made more workable,” says Erik Sirri, director of the SEC’s division of trading and markets.
The full text of the proposed changes is available in pdf format at the SEC’s website at http://www.sec.gov/rules/proposed/2008/34-58047.pdf.
The SEC will receive public comments about the proposed changes for 60 days.