The Securities and Exchange Commission (SEC), the US securities regulator, has proposed rule changes to increase the range of services foreign broker-dealers are allowed to offer in the US.
The proposals, which are now open to public comment, would modify the requirement that any contact a foreign broker dealer has with a US institution must be chaperoned by a person registered with a US 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,” said SEC chairman Christopher Cox. Further difficulties for US investors arise because US-registered personnel have to be available for communications with foreign broker-dealers, according to Cox. “Taken together, these limitations seriously hamper the service of US investors, while making them pay for brokerage services twice. They also effectively limit US investors’ access to certain foreign investments,” he said.
Erik Sirri, director of the SEC’s Division of Trading and Markets, added, “While the Commission has provided a useful framework for US 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.”
In general, the 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.
Under the new rules, foreign broker-dealers would be able to interact with US institutional investors with $25 million or more in investments, or individuals who own or control investments of more than $25 million. Under existing rules, foreign broker-dealers may only interact with institutions with financial assets of more than $100 million.