Securities and Exchange Commission (SEC) Rule 15a-6 under the Securities Exchange Act of 1934 (“Exchange Act”) provides conditional exemptions from the SEC’s broker-dealer registration requirements for foreign broker-dealers engaged in certain activities involving U.S. investors.
The SEC stated that its goals in adopting Rule 15a-6 are to “facilitate access to foreign markets by U.S. institutional investors through foreign broker-dealers and the research that they provide,” and to guide foreign broker-dealers in complying with U.S. broker-dealer registration requirements.
Below will provide you with a better understanding of what it takes to comply with SEC Rule 15a-6.
What is SEC Rule 15a-6?
Section 15(a) of the Exchange Act establishes that broker-dealers that use any means of interstate commerce to effect transactions in, or to induce or attempt to induce the purchase or sale of, any security generally must register with the SEC. Foreign broker-dealers, too, may be subject to SEC registration requirements if they induce or attempt to induce securities transactions with persons in the United States.
Under Rule 15a-6, foreign broker-dealers are exempt from SEC registration requirements if they:
- Effect unsolicited securities transactions for U.S. investors;
- Provide research reports to “major” U.S. institutional investors and effect transactions in the subject securities with or for those investors;
- Solicit and effect transactions with or for U.S. institutional investors or major U.S. institutional investors through a “chaperoning broker-dealer” (a registered U.S. broker-dealer that acts as an intermediary between the foreign broker-dealer and the U.S. client); and
- Solicit and effect transactions with or for registered broker-dealers, “banks” (as defined in the rule) acting in a broker or dealer capacity, certain international organizations, foreign persons temporarily present in the United States, U.S. citizens resident abroad, and foreign branches and agencies of U.S. persons.
What SEC guidance is available to help with Rule 15a-6 compliance?
Over time, the SEC has expanded and clarified Rule 15a-6 through a series of “no-action letters” and interpretive guidance.
Permitted transfers
Foreign broker-dealers (or their agents) could transfer funds or securities directly to a U.S. institutional investor or its agent without going through a U.S. chaperoning broker-dealer, provided that:
- The transaction involves U.S. government securities or qualifying foreign securities.
- The foreign broker-dealer shares all clearance and settlement information with the chaperoning broker-dealer.
- The foreign broker-dealer does not act as custodian for the investor’s funds or securities.
- The foreign broker-dealer is not in default on any material financial market transaction.
Expanded communication rules
The SEC also allowed foreign associated persons of a foreign broker-dealer to communicate more freely with U.S. investors, under these conditions:
- Oral communications with U.S. institutional investors (that are not “major” investors) may occur from outside the U.S. — but only outside NYSE trading hours and without accepting orders except for transactions in foreign securities.
- In-person visits with major U.S. institutional investors within the U.S. are allowed, provided:
- The total number of days such visits occur does not exceed 30 per year.
- No securities orders are accepted during those visits.
Additional Resources
The SEC has also issued FAQs on Regulation AC that address research activities of foreign broker-dealers, including those relying on Rule 15a-6(a)(2) exemptions. These resources provide practical examples and clarifications for common compliance scenarios.
Penalties for SEC Rule 15a-6 violations
A violation of SEC Rule 15a-6 can result in serious consequences, including significant fines or disgorgement from ill-gotten gains. In cases of serious or repeated violations, the SEC may suspend or revoke a foreign-broker dealer’s ability to operate in the U.S. market. Criminal charges may also result.
How Smarsh can help you meet SEC Rule 15a-6
Stay compliant with SEC Rule 15a-6 requirements while reducing risk and operational burden. Smarsh offers an end-to-end platform of AI-powered compliance solutions designed to streamline your compliance processes, reduce manual workloads and ensure adherence to regulatory requirements. With Smarsh, you can:
- Capture every conversation. Archive communications across all your most important communications channels (email, messaging, voice, social, mobile) for complete visibility and compliance.
- Detect more real risk with AI. Use machine learning and customizable risk scenarios to surface suitability concerns, reduce false positives and flag misconduct faster.
- Customize and test supervision models. Build and refine risk detection logic with no-code tools like Scenario Builder and Scenario Evaluator.
- Scale with confidence. Trusted by global financial firms, Smarsh helps you meet regulatory expectations while managing growing communication volumes.
SEC Rule 15a-6 FAQs
What is SEC Rule 15a-6?
SEC Rule 15a-6 provides conditional exemptions allowing foreign broker-dealers to engage with U.S. investors without registering, under specific conditions.
Who qualifies for Rule 15a-6 exemptions?
Foreign broker-dealers may qualify if they only effect unsolicited trades, provide research, or transact through a U.S. chaperoning broker-dealer.
What are chaperoning broker-dealers?
They are registered U.S. broker-dealers who act as intermediaries between foreign broker-dealers and U.S. institutional investors.