FAQ About Securities Offerings Under Regulation S

Have you been considering a securities offering under Regulation S for the first time? If you don't know much about Regulation 5, it is not wise to move forward with the offering until you have obtained knowledge. You don't want to end up breaking a rule that leads to you getting fined, or possibly even getting into legal trouble. This article covers some of the important things that you might want to know in regards to Regulation S when dealing with securities.

What Does Regulation S Mean?

Basically, Regulation S is an exemption for Section 5 of the Securities Act of 1933. The regulation pertains to any securities offerings that are handled outside of the United States (US). Regulation S allows the offerings to be excluded from having to be registered, which can make the business process a lot faster. Keep in mind that the regulation is useful whether your offering is private or public.

Are There Specific Transactions That Are Allowed?

Debt and equity securities are both eligible for exemption under Regulation S. For instance, programs that have continuous offerings are transactions that can be made under Regulation S, such as for debts. If different offerings are combined, Regulation S will come into play as well. However, the transaction will be breaking a rule if it is done within the United States. Rule 144A offerings can actually be exempt from registration even when they are conducted in the US. A single offering that is conducted in a country other than the US can be conducted as well.

Are Only Certain People About to Rely on Regulation S?

If you own an investment company that is open-end, it disqualifies you from being exempt under Regulation S. A closed-end investment company might also be disqualified if registration is mandatory. Both US and foreign reporting issuers are able to be exempt from registration under Regulation S. Non-reporting issuers are able to rely on the exemption. Any affiliates of the issuer can rely on the regulation no matter where they are located.

When Can a Regulation S Security Be Offered or Sold?

There will be a distribution compliance period that restricts any U.S. buyers to purchase a security during that time. An exception will be made if a specific security is exempt from having to be registered. The length of time for the distribution compliance period will depend on which category the securities are in, but Category 1 securities are not under a specific distribution compliance time.