July 17, 1989
TO: SEC RULES COMMITTEE NO. 38-89
INTERNATIONAL FUNDS TASK FORCE NO. 4-89
CLOSED-END FUND COMMITTEE NO. 26-89
UNIT INVESTMENT TRUST COMMITTEE NO. 34-89
RE: REPROPOSED REGULATION S
__________________________________________________________
The SEC has reproposed in the attached release
Regulation S, which is intended to clarify the application of the
registration requirements under the Securities Act of 1933 to
offshore transactions.
As originally proposed, the safe harbors under the
Regulation would continue to impose two general conditions.
However, with respect to the first condition that the offer or
sale of securities be made in an "offshore transaction," the
definition of an "offshore transaction" has been broadened to
include designated organized foreign securities markets. In
addition, the second condition that no "directed selling efforts"
be made in the U.S. has been modified to emphasize that the
prohibition relates only to activities intended to result in
general preconditioning of the U.S. market.
Several changes have also been made to the terms and
conditions under the safe harbors. A significant change has been
made to the definition of a "U.S. person." As recommended by the
Institute in its comment letter, the revised definition would not
include investment advisers or other professional fiduciaries
located in the U.S. if the beneficial owner of the security was
not a U.S. person. (See Memorandum to SEC Rules Committee No.
73-88 and International Funds Task Force No. 12-88, dated
December 5, 1988.) However, any transaction with a fiduciary
would still have to be made outside the U.S. to be eligible to
rely on the safe harbors under the Regulation.
In addition, two of the categories of issuers included in
the safe harbors under the Regulation have been slightly
expanded. Under the reproposal, the first category would extend
to all foreign issuers with no substantial U.S. market interest,
regardless of their reporting status. The second category, as
revised, would include all reporting issuers and debt securities
offered and sold by foreign issuers regardless of their reporting
status. The third residual category, which imposes the most
conditions for eligibility under the safe harbor, would be
available for all issuers offering securities, including non-
reporting U.S. issuers and non-reporting foreign issuers offering
equity securities with a substantial U.S. market interest.
The resale safe harbor has also been modified. As revised,
the resale safe harbor would impose restrictions beyond the
general conditions discussed above only where the securities were
sold by a dealer or other person receiving a selling concession,
fee or other remuneration. The revised resale safe harbor also
would permit resales of any securities on established foreign
securities exchanges and designated organized foreign securities
market if the selling dealer did not know that the buyer was a
U.S. person.
The comment period for the reproposed Regulation ends on
September 12, 1989. Please provide me with any comments you may
have on the reproposal by August 18, 1989.
Amy B. Rosenblum
Assistant General Counsel
Attachment