Securities offerings and listings in the US: an ... - Latham & Watkins

Chapter 3 – Key exemptions from Securities Act registrationChapter 3Key exemptions from SecuritiesAct registrationGeneralAs discussed above, the process of registering a securitiestransaction requires a foreign private issuer to meetspecific disclosure and financial statement requirementsand to undergo the SEC review process. By contrast,unregistered transactions are typically less complex andtime-consuming to execute. Many foreign privateissuers accordingly choose to structure securitiesofferings in the United States to take advantage ofavailable exemptions from registration.Practice point:Unregistered transactions do not require the filing of aregistration statement and generally do not turn theissuer into a reporting company that is required to fileannual reports with the SEC. A key attraction of thesetransactions for a foreign private issuer is that it caninclude its financial statements under local Gaap (orinternational accounting standards) and need not providea reconciliation to US Gaap. The time andexpense involved in a US Gaap reconciliation can bea significant concern for a foreign private issuer that isseeking to access the US capital markets.We summarize the most common exemptions used byforeign private issuers below.Regulation S – offshore offeringsRegulation S sets out the conditions under which anoffering outside the United States may be made withoutregistration under the Securities Act. It provides a safeharbour exemption for offers and sales by issuers, and aresale exemption. Under Regulation S, unregisteredoffers and sales may generally be made if (i) the offer orsale is made in an offshore transaction; and (ii) there areno directed selling efforts in the United States. 65 Werefer to these as the “Regulation S GeneralConditions.”An offshore transaction is defined as an offer which isnot made to a person in the United States, and either:• at the time the buy order is originated, the buyer isoutside the United States or the seller (and anyperson acting on the seller’s behalf) reasonablybelieves that the buyer is outside of the United States;• for purposes of the issuer safe harbour, the transactionis executed in, on or through the physical tradingfloor of an established foreign securities exchangelocated outside of the United States; or• for purposes of the resale safe harbour, the transactionis executed in, on or through the facilities of adesignated offshore securities market and neither theseller (nor any person acting on the seller’s behalf)knows that the transaction has been prearranged witha buyer in the United States. 66“Directed selling efforts” is broadly defined to includeany activities that have, or can reasonably be expected tohave, the effect of conditioning the market in theUnited States for the securities being offered in relianceon Regulation S. 67 Prohibited efforts include mailingoffering materials into the United States; conductingpromotional seminars in the United States; grantinginterviews about the offering in the United Stateswww.iflr.comUS SECURITIES OFFERINGS: A GUIDE FOR NON-US ISSUERS15