US Securities Regulation
1) Why are US securities laws particularly topical right now?
The US capital markets are the largest and most liquid in the world, offering tremendous opportunities for international companies (ie, non-US companies) to finance their operations. Raising capital in these markets has grown in importance as the global credit crisis has often made other sources of financing more difficult to access. However, accessing the US capital markets requires compliance with the requirements of the US securities laws, which have become increasingly complex over the last decade. This makes it critical for international companies to have a practical knowledge of the issues presented by these requirements and the various exemptions available.
(2) What is the dilemma currently facing international companies in the US capital markets?
For many international companies, raising capital in the United States offers the best financing option for their business needs, while others seek it to obtain increased liquidity and a more diversified investor base. However, these goals are sometimes overshadowed by the sense that complying with the Sarbanes-Oxley Act and other requirements for an offering registered with the US Securities and Exchange Commission will be impracticable. These requirements have caused issuers to look for alternatives to a registered public offering in the United States.
(3) What financing alternatives are commonly used by international companies in the face of this dilemma?
International companies are increasingly considering private placements in the US capital markets as a financing alternative. Private placements provide access to US capital, but without the burdensome requirements of a registered offering. These private placements may consist of either debt or equity securities, and may be offered in accordance with Rule 144A or another exemption from registration. The purchasers in private placements are usually institutional investors, who are more sophisticated than retail investors.
In addition, international companies that are publicly listed on their home stock markets often establish over-the-counter American depositary receipt (ADR) programmes in the United States in order to provide their shares with greater liquidity and potentially a higher valuation. These ADR programmes can be structured in a manner that will not subject the issuer to the Sarbanes-Oxley Act or other reporting obligations under the Exchange Act.
(4) What purpose does your book serve? Who is the intended audience?
The book provides a practical and detailed overview of the requirements of US securities laws applicable to international companies. It is a useful reference for international business executives, bankers and lawyers evaluating the options available to access the US capital markets and the compliance obligations associated with each option.
While its substance is detailed, the book was written with a practical focus – it is not intended to replace the various multi-volume academic treatises on the subject. Rather, it contains checklists, bullet points, background on current regulatory trends and other practical tools to enable an international company’s executives, bankers and lawyers to make more informed decisions.