Chapter 16
INTERNATIONAL SECURITIES REGULATION
In the modern world of corporate
transactions and deals, it is often necessary for several persons, corporations
and/or other legal entities, such as general partnerships, limited partnerships
or joint ventures, to enter into agreements for the purchase of securities in a
particular venture.[1] It is more than likely that the parties will
reside in different states, or even countries.
It
is also possible to have the involvement of federal securities laws in a
transaction in a foreign country or countries.[2]
The federal securities laws can have
an effect on a transaction involving United States citizens investing in a
foreign transaction.[3]
It is necessary for all attorneys
and business executives involved in modern business transactions to be fully
aware and cognizant of the possibility that federal securities law is
applicable to many such transactions conducted in foreign countries.[4]
Section 416 of the Restatement of
the Foreign Relations Law of the United States[5]
as revised by the American Law Institute provides that the United States
generally has jurisdiction to prescribe with respect to any transaction in
securities in the United States to which a national or resident is a party, to
conduct, regardless of where it occurs, significantly related to such
transaction, if the conduct has, or intends to have, a substantial effect in
the United States, and to conduct occurring predominantly in the United States
related to a transaction in securities, even if the transaction occurs outside
the United States.[6]
Section 403 of the Restatement of
the Foreign Relations Law of the United States[7]
as revised by the American Law Institute provides that the judging of whether
or not the exercise of jurisdiction is reasonable or unreasonable requires
evaluating all relevant factors, including, the extent to which the activity
takes place within the regulating state, or has substantial, direct, and
foreseeable effect upon or in the regulating state.[8]
Section 1905 of the Federal
Securities Code[9]
proposes to apply federal securities law to a sale of a security, an offer to
sell or buy a security, or an inducement not to buy a security, a proxy
solicitation, a tender offer, or any activity as an investment adviser that
occurs within the United States although initiated outside the United States,
as well as to any prohibited, required, or actionable conduct whose constituent
elements occur to a substantial, but not necessarily predominant, extent within
the United States or some or all of whose constituent elements occur outside
the United States but cause a substantial effect within it.
EUROPE & OVERSEAS COMMODITY TRADERS v. BANQUE PARIBAS
LONDON, 147 F.3d 118 (2d Cir. 1998)
A number of agreements are in effect
between various exchanges and market systems in the United States and other
such entities in foreign countries to foster the international trading of
securities.[10] In addition, agreements are in effect,
usually consisting of a Memorandum of Understanding or a mutual assistance
treaty,[11]
between securities regulators in the United States and securities regulators in
a number of foreign countries to facilitate the sharing of information and to
provide official assistance in obtaining information.[12]
ENFORCEMENT, Securities and Exchange Commission 1998
Annual Report
SEC REGULATION S, 17 C.F.R. §§ 230.901-.904 (1990)
STATEMENT OF THE COMMISSION REGARDING THE USE OF INTERNET
WEB SITES TO OFFER SECURITIES, SOLICIT SECURITIES TRANSACTIONS, OR ADVERTISE
INVESTMENT SERVICES OFFSHORE, Securities Act Release No. 33-7516 (March 23,
1998)
More and more foreign countries have
local securities laws that affect securities transactions.[13] Many of these countries are currently in the
process of modernizing their securities laws to reflect the growing
globalization of the trading markets as well as complex transnational financing
arrangements.[14]
INTERNATIONAL DISCLOSURE STANDARDS, Securities Act Release
No. 33-7745 (September 28, 1999)
©
2000 Harry Stansbury
[1] See RON CHERNOW, THE HOUSE OF MORGAN 695-99 (1990).
[2] See Note, American Adjudication of Transnational
Securities Fraud, 89 Harv. L. Rev. 553, 563-71 (1976).
[3] SEC Securities Act Release No. 6568 (Feb. 28, 1985),
reprinted in 32 SEC DOCKET 707 (1985); SEC Securities Act Release No. 6866
(June 6, 1990), reprinted in 46 SEC DOCKET 7 (1990); see 2 LOUIS LOSS &
JOEL SELIGMAN, SECURITIES REGULATION 792-806 (3d ed. 1989); see, e.g., Manuel
Lorenz, EEC Law and Other Problems in Applying the SEC Proposal on
Multinational Offerings to the U.K., 21 Int'l Law. 795, 795-99 (1987); Louis
Loss, Extraterritoriality in the Federal Securities Code, 20 Harv. Int'l L.J.
305, 305-14 (1979); Robert C. Pozen, Disclosure and Trading in an International
Securities Market, 15 Int'l Law. 84, 84-90 (1981); Morton R. Pierce, SEC Looks at
Multinationals, N.Y. L.J., Sept. 10, 1990, at 5; Jorie Roberts, Symposium Airs
Multinational Issues, Harv. L. Rec., Mar. 2, 1979, at 6.
[4] See HENRY J. STEINER & DETLEV F. VAGHTS,
TRANSNATIONAL LEGAL PROBLEMS 1047-74 (2d ed. 1976); Note, Predictability and
Comity: Toward Common Principles of Extraterritorial Jurisdiction, 98 Harv. L.
Rev. 1310, 1314-16 (1985); Martin Mayer, Bernie Cornfeld's First Billion,
Fortune, Mar. 1968, at 138.
[5] RESTATEMENT (THIRD) OF THE FOREIGN RELATIONS LAW OF THE
UNITED STATES § 416 (1987).
[6] See RICHARD W. JENNINGS & HAROLD MARSH, JR.,
SECURITIES REGULATION 1582-86, 1592-97 (6th ed. 1987).
[7] RESTATEMENT (THIRD) OF THE FOREIGN RELATIONS LAW OF THE
UNITED STATES § 403 (1987).
[8] See RICHARD W. JENNINGS & HAROLD MARSH, JR., SECURITIES
REGULATION 1582, 1597-1603 (6th ed. 1987).
[9] FEDERAL SECURITIES CODE § 1905 (1980).
[10] See 5 LOUIS LOSS & JOEL SELIGMAN, SECURITIES
REGULATION 2567-70 (3d ed. 1990).
[11] See Stuart J. Kaswell, An Insider's View of the Insider
Trading and Securities Fraud Enforcement Act of 1988, 45 Bus. Law. 145, 171-75
(1989).
[12] See Roberta S. Karmel, The SEC Goes International, N.Y.
L.J., June 20, 1985, at 1.
[13] See, e.g., NORMAN S. POSER, INTERNATIONAL SECURITIES
REGULATION § 1.4, at 8-9 (1991); David M. Barnard, The U.K. Financial Services
Act, 1986: A New Regulatory Framework, 21 Int'l Law. 343, 344-48 (1987); Kelly
C. Crabb, The Reality of Extralegal Barriers to Mergers and Acquisitions in
Japan, 21 Int'l Law. 97, 101-04 (1987); Sam S. Miller, Regulating Financial
Services in the United Kingdom - An American Perspective, 44 Bus. Law. 323,
323-25 (1989).
[14] See, e.g., NORMAN S. POSER, INTERNATIONAL SECURITIES
REGULATION § 4.2, at 376-78 (1991); Manning G. Warren III, Global Harmonization
of Securities Laws: The Achievements of the European Communities, 31 Harv.
Int'l L.J. 185, 185-209 (1990); Nina Easton, Reuters Goes Public in Unusual
Style, Legal Times, June 11, 1984, at 1; Merrill Lynch: Bullish on the World,
Forbes, Nov. 1, 1972, at 30; Ann Monroe, Morgan Stanley Banks On a Hybrid
Strategy As Its World Changes, Wall St. J., June 27, 1985, at 1; Lois Moore,
New U.K. Laws On Insider Dealing, N.Y. L.J., Dec. 3, 1992, at 5.