A.

Understanding Regulation S
What is Regulation S?
Regulation is a series of rules that clarifies the position of the Securities and Exchange Commission (the
) that securities offered and sold outside of the
United States do not need to be registered with the
. Regulation explains that any offer or sale
occurring inside the United States is subject to the
registration requirements of Section of the Securities
Act of (the Securities Act) in the absence of an
exemption from these requirements. The regulation
then specifies two safe harbors, an issuer safe harbor
and a resale safe harbor, which provide that offers and
sales made in compliance with certain requirements
are deemed to have occurred outside the United
States and are, therefore, exempt from the registration
requirements of Section of the Securities Act.
Sources: Regulation Adopting Release, Securities
Act Release No. , Fed. Sec. L. Rep. ( )
,, at ,- (Apr. , ); see Securities Act
Rules - , .. . .-..
What is the General Theory of Regulation S?
Securities offered and sold outside the United States
need not be registered with the . The United
States securities laws are meant to protect United
States capital markets and investors who purchase
securities in United States markets, whether United
States or foreign nationals.
Sources: Regulation Adopting Release, Securities
Act Release No. , Fed. Sec. L. Rep. ( )
,, at ,-, , (Apr. , ).

Why Did the SEC Adopt Regulation S?

Read literally, Section of the Securities Act prohibits
any person from using interstate commerce in connection with the offer or sale of a security unless a registration statement is in effect with respect to such security.
For this purpose, interstate commerce includes trade or
commerce in securities between the United States and a
foreign country. Thus, theoretically, securities transactions
with only tenuous links to the United States could be
subject to the registration requirements of the Securities
Act. Historically, however, the has not required
these offerings to be registered. The views Section
of the Securities Act as a protection for United States
investors, and had stated in various releases issued prior to
the adoption of Regulation that securities offered or
sold outside of the United States would not be subject to
the registration requirements if indicated procedures
intended to ensure that the securities came to rest abroad
were followed. Because interpretations of the s
releases were unclear, the SEC adopted Regulation .
Source: Regulation S Adopting Release, Securities Act
Release No. , Fed. Sec. L. Rep. ( ) ,, at
, (Apr. , ); see Guy P. Lander, ..
Securities Law for International Financial Transactions
and Capital Markets : ().
How Many Rules Comprise Regulation S?
Regulation consists of five rules plus the Preliminary
Notes:
Rule : A General Statement
Rule : Definitions
Rule : The Issuer Safe Harbor
Rule : The Resale Safe Harbor
Rule : Resale Limitations

Source: Securities Act Rules -,

.-..

...

7. Regulation does not preclude access by journalists for publications with a general circulation
in the United States to offshore press conferences, press releases and meetings with company
press spokespersons in which an offshore offering
or tender offer is discussed, provided that the
information is made available to the foreign and
United States press generally and is not intended
to induce purchases of securities by persons in
the United States or tenders of securities by
United States holders.

B.The Preliminary Notes

What is the Importance of the Preliminary Notes?
The Preliminary Notes set forth guiding principles
that should be considered when structuring a transaction to comply with Regulation . They provide that:
1. Regulation relates solely to Section of the
Securities Act. The application of Regulation ,
however, does not limit the extraterritorial application of the antifraud or other provisions of the
federal securities laws.

8. Regulation is applicable to offers and sales of

securities issued by registered closed-end investment companies and investment companies that
are not registered or required to register under the
Investment Company Act of (the
Act). Regulation is not applicable to the offer
and sale of securities issued by open-end investment companies, unit investment trusts registered
or required to be registered under the Act, or
closed-end investment companies required to be
registered, but not registered, under the Act.

2. Regulation is not available with respect to any

transaction that, although in technical compliance with the regulation, is part of a plan or
scheme to evade the registration provisions of the
Securities Act. In such cases, registration under
the Securities Act is required.
3. The application of Regulation S does not limit
the need for compliance with the securities registration requirements or broker-dealer registration
requirements of the Securities Exchange Act of
.

Source: Securities Act Regulation S, Preliminary

Notes -, ... .-..
C. Rule 901 The General Statement

4. Regulation does not provide a safe harbor from

applicable state security laws, and states may
therefore insist on state blue-sky registration.

What is the General Statement?

Rule states that, for purposes of Section of the
Securities Act, the terms offer, offer to sell, sell, sale, and
offer to buy shall be deemed to include offers and sales
that occur within the United States and shall be deemed
not to include offers and sales that occur outside the
United States. A facts and circumstances test is used to
determine whether an offer or sale of securities occurs
outside the United States. The General Statement, however, does not list the factors used in such test. If one can
demonstrate that both the offer and sale of securities
occurred outside the United States, the registration
requirements of Section will not apply regardless of
whether the conditions of the Regulation safe harbors

5. Attempted compliance with any rule in

Regulation does not constitute an exclusive
election. A person who offers or sells securities
in reliance on Regulation may also rely on any
other applicable registration exemption.
6. Regulation is available only for offers and sales
of securities outside of the United States.
Securities acquired overseas, whether pursuant to
Regulation or not, may be resold in the United
States only after registration or under an available
registration exemption.

are met. In general, all transactions should be structured

to meet the conditions of the Regulation safe harbors,
but the General Statement can be relied upon if a safe
harbor condition is not met.

(c) in a continuous offering of non-convertible

debt securities offered and sold in identifiable
tranches, the distribution compliance period
for securities in a tranche shall commence
upon completion of the distribution of such
tranche, as determined and certified by the
managing underwriter or person performing
similar functions; and

Sources: Securities Act Rule , . . .

.; Regulation Adopting Release, Securities
Act Release No. , Fed. Sec. L. Rep. ( )
,, at , (Apr. , ); see Guy P. Lander,
. . Securities Law for International Financial
Transactions and Capital Markets : ().

(d) in a continuous offering of securities to be

acquired upon the exercise of warrants, the
distribution compliance period shall commence upon completion of the distribution
of the warrants, as determined and certified
by the managing underwriter or person performing similar functions, if requirements of
Rule (b)() are satisfied.1

D. Rule 902 - Definitions

What is Rule 902?
Rule defines various terms used in Regulation .
The terms set forth below, while not exhaustive, are
particularly relevant to understanding Regulation .
1. Directed Selling Efforts: (see Section

3. Distributor: means any underwriter, dealer, or

other person who participates, pursuant to a contractual arrangement, in the distribution of the
securities offered or sold in reliance on
Regulation .

below).

2. Distribution Compliance Period: the distribution

compliance period ensures that persons relying
on the issuer safe harbor of Rule do not
engage in unregistered distribution in the United
States during the offering period and during the
course of subsequent offshore trading after the
initial offering is completed. The period begins
when the securities are first offered to persons
other than distributors in reliance upon
Regulation S or the date of closing of the offering, whichever is later, and continues until the
end of the period of time specified in the relevant
provision of Rule 903, except that:

4. Offering Restrictions: means:

(a) each distributor agrees in writing:
i. that all offers and sales of the securities
prior to the expiration of the specified distribution compliance period shall be made
in accordance with the provisions of Rule
or Rule , pursuant to registration
requirements or pursuant to an available
exemption from registration; and
ii. not to engage in hedging transactions, in
connection with offers and sales of equity
securities of domestic issuers, prior to the
expiration of the specified distribution
compliance period, unless in compliance
with the Securities Act; and

(a) all offers and sales by a distributor of an

unsold allotment or subscription shall be
deemed to have been made during the distribution compliance period;
(b) in a continuous offering, the distribution
compliance period shall commence upon
completion of the distribution, as determined
and certified by the managing underwriter or
person performing similar functions;

(b) all offering materials and documents (other

than press releases) used in connection with
offers and sales of the securities prior to the
expiration of the distribution compliance

stock and certain asset-backed securities)

means that:

period must state that the securities have not

been registered under the Securities Act and
may not be offered or sold in the United
States or to United States persons (other than
distributors), unless the securities are registered under the Securities Act or exempt
from the registration requirements. For
offers and sales of equity securities of domestic issuers, such offering materials and documents also must state that hedging transactions involving those securities may not be
conducted unless in compliance with the
Securities Act. Such statements may appear
in summary form:

i. at least United States persons hold the

debt security; or
ii. $ billion or more of: the outstanding
principal, the greater of liquidation preference or par value of the non-participatory
preferred stock or the principal amount or
balance of its asset backed securities, is
held by United States persons; or
iii. % or more of: the outstanding principal,
the greater of liquidation preference or par
value of the non-participatory preferred
stock or the principal amount or balance
of its asset backed securities, is held by a
United States person;

i. on the cover or inside cover page of any

prospectus or offering circular used in
connection with the offering or sale of the
securities;

(c)

of market interest in the securities to be purchased upon the exercise of the warrants.

ii. in the underwriting section of any

prospectus or offering circular used in
connection with the offering or sale of the
securities; and

7. United States Person:

(a) The following are United States Persons:

iii. in any advertisement made or issued by

the issuer, any distributor, any of their
respective affiliates, or any person acting on
behalf of any of the foregoing.
5. Offshore Transaction: (see Section
6. Substantial United
(SUSMI):

States

i. any natural person resident in the United

States;
ii. any partnership or corporation organized
or incorporated under the laws of the
United States;

below).
Market

in Warrants is measured by the level

Interest

iii. any estate of which any executor or

administrator is a United States person;

(a) of an issuers equity security means

that:

iv. any trust of which any trustee is a United

States person;

i. the aggregate United States market was the

largest market for the previous year; or

v. any agency or branch of a foreign entity

located in the United States;

ii. United States markets accounted for %

or more of all trading the previous year and
no single foreign market accounted for %
of the prior years trading.

vi. any non-discretionary account or similar

account (other than an estate or trust) held
by a dealer or other fiduciary for the benefit or account of a United States person;

(b)

of an issuers debt security (which

vii. any discretionary account or similar

account (other than an estate or trust)

term includes nonparticipatory preferred

held by a dealer or other fiduciary organized, incorporated, or (if an individual)

resident in the United States;

iv. an employee benefit plan established and

administered in accordance with the law of
a country other than the United States and
customary practices and documentation of
such country;

viii. any partnership or corporation if:

1) organized or incorporated under the
laws of any foreign jurisdiction; and

v. any agency or branch of a United States

person located outside the United States if:

2) formed by a United States person principally for the purpose of investing in

securities not registered under the
Securities Act, unless it is organized or
incorporated, and owned, by accredited
investors (as defined in Rule (a))
who are not natural persons, estates or
trusts.

1) the agency or branch operates for valid

business reasons; and
2) the agency or branch is engaged in the
business of insurance or banking and is
subject to substantive insurance or banking regulation, respectively, in the jurisdiction where located; and

(b) The following are not United States persons:

vi. the International Monetary Fund, the

International Bank for Reconstruction and
Development, the Inter-American Development Bank, the Asian Development
Bank, the African Development Bank, the
United Nations, and their agencies, affiliates and pension plans, and any other similar international organizations, their agencies, affiliates and pension plans.

i. any discretionary account or similar

account (other than an estate or trust)
held for the benefit or account of a nonUnited States person by a dealer or other
professional fiduciary organized, incorporated, or (if an individual) resident in the
United States;
ii. any estate of which any professional fiduciary acting as executor or administrator is
a United States person if:

Source: Securities Act Rule ,

..

1) an executor or administrator of the

estate who is not a United States person
has sole or shared investment discretion
with respect to the assets of the estate;
and

. . .

E.The Two General Conditions for All

Regulation S Safe Harbors
What are the Two General Conditions that Apply to the
Safe Harbors?

2) the estate is governed by foreign law;

1. Any offer, sale or resale must be made in an offshore transaction (as described below).

iii. any trust of which any professional fiduciary acting as trustee is a United States person, if a trustee who is not a United States
person has sole or shared investment discretion with respect to the trust assets, and
no beneficiary of the trust (and no settlor
if the trust is revocable) is a United States
person;

2. No directed selling efforts (as described below),

may be made in the United States in connection
with an offer, sale or resale under the safe harbors.
Source: Regulation S Adopting Release, Securities
Act Release No. , Fed. Sec. L. Rep. ( )
,, at , (Apr. , ).

reliance on Regulation S. Such activity includes placing an advertisement in a publication with a general
circulation in the United States that refers to the offering of securities being made in reliance upon
Regulation S.

What is an Offshore Transaction?

An offshore transaction is a transaction where no offer
is made to a person in the United States and where the
sale is made in one of the following ways:
1. at the time the buy order is originated, the buyer
is outside the United States, or the seller and any
person acting on its behalf reasonably believe that
the buyer is outside the United States; 2

Source: Securities Act Rule (c)(), ...

.(c)(); Regulation Adopting Release,
Securities Act Release No. , Fed. Sec. L. Rep.
( ) ,, at , (Apr. , ).

2. for Rule , the transaction is executed in, on,

or through a physical trading floor of an established foreign securities exchange that is located
outside the United States;3 or

What Specific Actions are Considered Directed Selling

Efforts?
1. Mailing printed materials to United States
investors.

3. for Rule , the transaction is executed in, on,

or through the facilities of a designated offshore
securities market (e.g., the Amsterdam Stock
Exchange, The Stock Exchange of Hong Kong,
the London Stock Exchange and any foreign
securities exchange or non-exchange market
designated by the ) and neither the seller nor
any person acting on its behalf knows that the
transaction has been pre-arranged with a buyer in
the United States.

2. Conducting promotional seminars in the United

States.
3. Placing advertisements in a publication with a
general circulation in the United States.
4. Placing advertisements with radio or television
stations broadcasting into the United States.
5. Making offers directed at identifiable groups of
United States citizens in a foreign country (such
as members of the United States military).

In general, to be considered outside of the United

States, the buyer himself, rather than his agent, must be
outside of the United States. This reduces evidentiary
and administrative difficulties associated with the
requirement. If, however, the buyer is a corporation or
an investment company, then the buyer is considered
to be outside of the United States when an authorized
employee places the buy order while outside the
United States.

Sources: Securities Act Rule (c)(), ...

.(c)(); Regulation Adopting Release,
Securities Act Release No. , Fed. Sec. L. Rep.
( ) ,, at ,, , (Apr. , ).
What Activities are Specifically Excluded From the
Definition of Directed Selling Efforts?

Sources: Securities Act Rule (h), ...

.(h); see Guy P. Lander, .. Securities
Law for International Financial Transactions and
Capital Markets : ().

1. Advertisements required to be published under

law or regulatory rule.
2. Communications with persons excluded from
the definition of United States person.
3.Tombstone advertisements in publications that
have less than percent of their circulation in
the United States.

What are Directed Selling Efforts?

Directed selling efforts means any activity undertaken
for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the
United States for any of the securities being offered in

4. Bona fide visits to real estate facilities by prospective investors.

Lander, . . Securities Law for International

Financial Transactions and Capital Markets :
().

5. Quotations of a foreign broker-dealer distributed

by a third-party system that primarily distributes
such information in foreign countries, provided
that (a) no security transaction can be executed
through the system between foreign broker-dealers, and persons in the United States, and (b) contact with United States persons is not initiated.

What Types of Offerings May be Made Under Category 1?

Category offerings consist of:
1. offerings by foreign issuers that reasonably
believe, at the commencement of the offering,
that there is no in the securities to be
offered or sold or, in the case of warrants or convertible securities, the securities underlying the
securities to be offered or sold;

6. Proper notice, under Rule of the Securities

Act that an issuer intends to make a registered
public offering of its securities.
7. Providing journalists with access to issuer meetings held outside the United States, or providing
written press or press-related materials released
outside the United States in compliance with
Rule e of the Securities Act.

2. overseas directed offerings, which are either

offerings by (i) foreign issuers to residents of a
single country outside the United States or (ii)
domestic issuers of non-convertible debt securities to residents of a single country outside the
United States, if the securities are not denominated in United States dollars;

8. Isolated limited contact.

9. Routine advertising unrelated to selling efforts.
10. Customary and legal activities conducted outside of the United States.

3. offerings in which the securities are backed by

full faith or credit of a foreign government; and

Source: Securities Act Rule (c)(), ...

.(c)(); Regulation Adopting Release,
Securities Act Release No. , Fed. Sec. L. Rep.
( ) ,, at , (Apr. , ).

4. certain employee benefit plan offerings established and administered according to the law of
another country.
Source: Securities Act Rule (b)(),
.(b)().

F. Rule 903 The Issuer Safe Harbor

What is Rule 903 The Issuer Safe Harbor?
Rule , the first Regulation safe harbor, is available to all issuers, distributors, and their affiliates. Rule
specifies three categories of permissible issuer
offerings and imposes different safeguards on each category to prevent securities offered abroad from flowing back into the United States. In addition, the two
general conditions (offshore transactions and no
directed selling efforts), apply to all three categories.

...

Are There Any Additional Requirements That Need to be

Satisfied in Connection With a Category 1 Offering?
No, because the probability of the securities flowing
back into the United States is thought to be low.
Source: Regulation Adopting Release, Securities
Act Release No. , Fed. Sec. L. Rep. ( )
,, at , (Apr. , ).
What Types of Offerings May be Made Under Category 2?
Category offerings consist of:

Sources: Securities Act Rule , ...

.; Regulation Adopting Release, Securities
Act Release No. , Fed. Sec. L. Rep. ( )
,, at , (Apr. , ); see Guy P.

1. equity offerings by reporting foreign issuers;

2. debt offerings by reporting issuers; and

3. debt offerings by non-reporting domestic issuers

that do not qualify for Category 1 offerings.

3. debt offerings by non-reporting foreign issuers.

Source: Securities Act Rule (b)(),
.(b)().

...

Source: Securities Act Rule (b)(),

.(b)().

Are There Any Additional Requirements That Need to be

Satisfied in Connection With a Category 2 Offering?
Yes. In Category offerings, flowback of securities is
considered more likely than in Category offerings,
but the presumed information and sophistication of
the United States markets in these securities is thought
to offset the flowback risk. The three types of
Category offerings must comply with the two general conditions as well as the following additional
requirements:

...

Are There Any Additional Requirements That Need to be

Satisfied in Connection With a Category 3 Offering?
Yes. Because the risk of flowback of Category securities into the United States is considered high, in
addition to the general conditions, each participant in
the Category offerings must implement offering
restrictions and comply with the following additional
requirements:
1. In the case of debt securities:

1. each participant in the distribution must implement offering restrictions;

(a) the offer or sale, if made prior to the expiration of a -day distribution compliance
period, is not made to a United States person
or for the account or benefit of a United
States person (other than a distributor); and

2. the offer or sale, if made prior to the expiration

of a -day distribution compliance period, is not
made to a United States person or for the
account or benefit of a United States person
(other than a distributor); and

(b) debt securities must be issued under a temporary global security that is not exchangeable for definitive securities until the -day
distribution compliance period expires, and
for non-distributor purchasers, until certification of beneficial ownership of the securities
by a non-United States person or by a
United States person who purchased the
securities in an exempt transaction;

3. each distributor must notify all participants that,

during the -day distribution compliance period, each participant is subject to the same restrictions on offers and sales that apply to the distributors.
Sources: Securities Act Rule (b)(), ...
.(b)(); Regulation Adopting Release,
Securities Act Release No. , Fed. Sec. L. Rep.
( ) ,, at , (Apr. , ).

2. In the case of equity securities:

(a) the offer or sale, if made prior to the expiration of a one-year distribution compliance
period, is not made to a .. person or for
the account or benefit of a .. person
(other than a distributor); and

What Types of Offerings May be Made Under Category 3?

Category is a residual category for offerings not covered by Category or Category . Category offerings effectively consist of:

(b) the offer or sale of equity securities, if made

before the expiration of the one year distribution compliance period, must be made in
accordance with the following conditions:

1. equity offerings by reporting and non-reporting

domestic issuers;
2. equity offerings by non-reporting foreign issuers
with for the class of securities being
offered; and

i. the purchaser must certify that it is either

a non-United States person and is not

acquiring the securities for the account or

benefit of any United States person, or
that it is a United States person purchasing securities in an exempt transaction;

2. Convertible Debt Securities: a convertible debt security has the same status as its underlying security.
3. Warrants: because warrants are treated as equity
under the Securities Act, warrant offerings are
treated as equity offerings for Regulation safe
harbor categories.

ii. the purchaser must agree: (a) that any

resale will either be in accordance with
Regulation , after registration, or under a
registration exemption; and (b) not to
engage in hedging transactions for those
securities, except in compliance with the
Securities Act;

4. Unit Securities: in general, the most restrictive of

the applicable categories will govern the unit
offering. If, however, the securities making up
the units may be separately traded immediately
after issuance, to the extent feasible, the restrictions of the issuer safe harbor may be applied as
if the securities making up the units were separately distributed. For example, if a unit consisting of both debt and equity securities is offered
and sold under Category , the distribution
compliance period for equity would apply to
the debt security unless the securities making up
the unit may be separately traded immediately
after issuance, in which case the debt and equity securities would have their separate distribution compliance periods.

iii. securities of a domestic issuer must contain a legend stating (a) that the transfer of
the security is prohibited, unless the transaction (1) complies with Regulation , (2)
is after registration, or (3) is under a registration exemption; and (b) that hedging
those securities is prohibited, unless done
in compliance with the Securities Act; and
iv. the issuer must be required by contract or
by a provision in its bylaws, articles of
incorporation, or comparable document to
refuse to register any transfer of the securities that is not made either in accordance
with Regulation , after registration, or
under a registration exemption.

Sources: Securities Act Rule (b)(), ...

.(b)(); Securities Act Rule (b)(),
... .(b)(); see Regulation Adopting
Release, Securities Act Release No. , Fed. Sec. L.
Rep. ( ) ,, at , (Apr. , ).

Sources: Securities Act Rule (b)(), ...

.(b)(); Regulation Adopting Release,
Securities Act Release No. , Fed. Sec. L. Rep.
( ) ,, at , (Apr. , ); Regulation
Amendments Adopting Release, Securities Act
Release No. , (Feb. , ).

G. Rule 904 The Resale Safe Harbor

What is the Resale Safe Harbor?
Pursuant to Rule , resales by (a) any persons other
than the issuer, a distributor or their respective affiliates, and (b) any officer or director of the issuer or a
distributor who is an affiliate solely by virtue of
holding such position, are deemed to have occurred
outside the United States, if the two general conditions (offshore transactions and no directed selling
efforts), plus any applicable additional resale requirements, are met.

What Other Financings are Governed by Rule 903 and

How are Their Rule 903 Categories Determined?
1. Guaranteed Debt: the requirements of Rule ,
applicable to the offer and sale of the guarantee
of the issuers parent, must be satisfied with
respect to the offer and sale of the guaranteed
debt securities.

Source: Securities Act Rule (a),

.(a).

...

.(b); Regulation Adopting Release,

Securities Act Release No. , Fed. Sec. L. Rep.
( ) ,, at , (Apr. , ).

What are the Additional Rule 904 Requirements?

What Types of Securities May be Sold Under the Resale
Safe Harbor?
The resale safe harbor is available for all securities,
whether or not acquired in an offshore transaction.
For example, securities originally sold under a private
placement exemption may be resold outside the
United States under Rule without affecting the
validity of the original transaction.

1. Resales by Dealers and Persons Receiving Selling

Concessions: resales of securities prior to the
expiration of the distribution compliance period,
as described in Categories and of Rule ,
by a dealer or a person receiving a selling concession, fee or other remuneration in respect of
securities being offered or sold, are permitted if:
(a) neither the seller nor any person acting on its
behalf knows that the buyer is a United States
person; and

Source: Securities Act Rule (a), ...

.(a); Regulation Adopting Release, Securities
Act Release No. , Fed. Sec. L. Rep. ( )
,, at , (Apr. , ); see Guy P. Lander,
. . Securities Law for International Financial
Transactions and Capital Markets : ().

(b) the seller, or any person acting on behalf of

such seller, knows that the purchaser is a dealer or a person receiving a selling concession,
fee, or other remuneration in respect of securities being sold, and the seller or the person
acting on the sellers behalf sends to the purchaser a confirmation or other notice stating
that the securities may be sold during the distribution compliance period only in accordance with Regulation , pursuant to a registration statement, or pursuant to an exemption from the registration requirements of the
Securities Act.

H. Rule 905 Resale Limitations

What is Rule 905?
Rule was enacted to prevent purchasers of securities issued pursuant to Regulation S, other than the
issuer, distributor, or agent thereof, from illegal or
improper conduct (e.g., to prevent investors from purchasing Regulation securities with the intention of
distributing them in United States markets at the end of
the distribution compliance period). Rule states
that equity securities of domestic issuers acquired from
the issuer, a distributor or their respective affiliates in a
transaction subject to the conditions of Rule or
are deemed to be restricted securities as defined in Rule
under the Securities Act. An offshore purchaser
therefore can resell such securities only in accordance
with Regulation , pursuant to registration under the
Securities Act or pursuant to an applicable exemption
from the registration requirements of the Securities Act.
Any restricted securities that were equity securities of a
domestic issuer will continue to be restricted securities,
notwithstanding that they were acquired in a resale

2. Resales by Certain Affiliates: in the case of an

offer or sale by an officer or director of the issuer
or a distributor, who is an affiliate of the issuer or
distributor solely by virtue of holding such position (and not because of his or her security holdings), no selling concession, fee, or other remuneration may be paid in connection with such
offer and sale, other than the usual and customary brokers commission that would be received
by a person executing such transaction as an
agent. Other affiliates must comply with the
requirements of the issuer safe harbor.
Sources: Securities Act Rule (b),

...

see Guy P. Lander, . . Securities Law for

International Financial Transactions and Capital
Markets : ().

transaction pursuant to Rule or Rule .

Rule also states that the resale of restricted
securities offshore under the Rule Resale Safe
Harbor does not eliminate the restricted status of
those securities.

What Happens if an Issuer or Reseller of Securities Pursuant

to Regulation S Fails to Comply With the Applicable
Provisions Thereof?

Sources: Securities Act Rule , ...

.; Regulation Amendments Adopting
Release, Securities Act Release No. ,
(Feb. , ); see Guy P. Lander, ..
Securities Law for International Financial Transactions
and Capital Markets : ().

1.The Issuer Safe Harbor.

(a) If the issuer, a distributor, any of their respective affiliates (other than officers and directors
relying on the Rule 904 Resale Safe Harbor),
or any person acting on behalf of any of
them, either: (a) fails to comply with the
offering restrictions, or (b) engages in directed selling efforts in the United States, then
the Rule issuer safe harbor is unavailable
to every person involved in the offering.

I. Miscellaneous
Can Securities Initially Sold Outside the United States
Under Regulation S be Resold During the Distribution
Compliance Period?
Yes.
Securities initially sold offshore under
Regulation S may be resold during the compliance
period if they are sold:

(b) If the issuer, a distributor, any of their

respective affiliates (other than officers and
directors relying on the Resale Safe
Harbor), or any person acting on behalf of
any of them, fails to comply with any other
requirement of the issuer safe harbor, then
the safe harbor is not available for any offer
or sale made by the person failing to comply or its affiliates, but remains available for
offers and sales by other persons.

1. outside the United States under Rule or

Rule ;
2. in the United States after registration; or
3. in the United States under Rule , a safe harbor exemption, or another exemption from the
registration requirements of the Securities Act.
Sources: Securities Act Regulation , Preliminary
Note , ... ., ., .;
Securities Act Rules , , .
Can Securities Offered and Sold Outside the United States
Under Regulation S be Resold After the Distribution
Compliance Period?
Yes. After the end of the distribution compliance
period, resales are permissible under Sections () and
() of the Securities Act, or another applicable
exemption.

2. The Resale Safe Harbor.

(a) The availability of the Resale Safe Harbor
generally is unaffected by the actions of the
issuer, a distributor, or their respective affiliates (other than certain officers and directors
relying on the Resale Safe Harbor) or agents.
That is, an offer or sale of securities made in
compliance with the Resale Safe Harbor
remains unaffected by non-complying offers
or resales made by other persons unaffiliated
with, and not acting on behalf of, the seller.

Sources: Securities Act Regulation , Preliminary

Note , . . . .-.; Regulation
Amendments Adopting Release, Securities Act
Release No. , (Feb. , );

Source: Regulation S Adopting Release, Securities Act

Release No. , Fed. Sec. L. Rep. ( ) ,, at

, (Apr. , ); see Guy P. Lander, ..

Securities Law for International Financial Transactions
and Capital Markets : ().
Are Contemporaneous United States and Offshore
Investments Integrated?
No. Regulation permits offshore transactions to
occur contemporaneously with domestic United States
offerings as long as the offshore offering complies with
Regulation requirements.
Source: Regulation Adopting Release, Securities
Act Release No. , Fed. Sec. L. Rep. ( )
,, at , (Apr. , ).
How are Sales of Equity Securities by Domestic Issuers
Under Regulation S Reported?
These sales are reported on the issuers next Form , - , - or - , as applicable, or, if the
domestic issuer so elects, on a Form - .
Source: Regulation Amendments Adopting Release,
Securities Act Release No. , (Feb.
, ).

By Melvin Epstein, Robert Guazzo, and Joel

Rubenstein, of Stroock & Stroock & Lavan .4
1. Rule 903(b)(5) requires (a) warrants offered or sold under
Category 2 or 3 to have a legend stating that the warrant and
the securities to be issued upon its exercise have not been
registered under the Securities Act and that the warrant may
not be exercised by or on behalf of a United States person
unless registered under the Securities Act or an exemption
from registration is available; (b) each person exercising the
warrant gives written certification that it is not a United
States person and the warrant is not being exercised on
behalf of a United States person; and (c) procedures to be
implemented to ensure that the warrant may not be exercised
within the United States, and that the securities may not be
delivered within the United States upon exercise other than
in an offshore transaction, unless registered under the
Securities Act or an exemption from the registration requirements is available.
2. Requiring the buyer to be overseas provides evidence of the
offshore nature of the transaction and supports the presumption that the buyer is aware that registration is not required.
3. This requirement establishes the foreign locus of the transaction and supports the presumption that buyers rely on local
protections, not United States registration requirements.
4. Melvin Epstein is a partner, and Robert Guazzo and Joel
Rubenstein are associates, in Stroocks Securities Practice
Group.

Maiden Lane
New York, -
Tel: ..
Fax: ..

First Union Financial Center

South Biscayne Boulevard
Suite
Miami, -
Tel: ..
Fax: ..

Floors and
Century Park East
Los Angeles, -
Tel: ..
Fax: ..

www.stroock.com

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...

Stroock & Stroock & Lavan is a law firm with a national and international practice serving clients that include
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governments, industrial enterprises, and entrepreneurial ventures such as emerging companies and technology.