Securities Act of 1933
Regulation S - Offers and Sales Made Outside the United States

November 13, 2014

RESPONSE OF THE OFFICE OF INTERNATIONAL CORPORATE FINANCE
DIVISION OF CORPORATION FINANCE

Based on the facts presented, the Division's views are as follows.  Capitalized terms have the same meanings as defined in your letter.   

• When offering or selling securities under Category 1 and Category 2, as those terms are defined under Regulation S under the Securities Act, through the ASX Bookbuild facility on the ASX, foreign private issuers may rely on the ASX Bookbuild rules and the warranties of brokers and their clients, as specifically provided in your letter, to establish a reasonable belief that a buyer is outside the United States for the purpose of complying with Securities Act Rule 903(a)(1).
   
• When offering or selling securities under Category 2 under Regulation S of foreign private issuers through the ASX Bookbuild facility on the ASX, those issuers, their distributors, any of their affiliates, or any person acting on their behalf, may rely on the ASX Bookbuild rules and warranties of brokers and their clients, as described inyour letter, for the purpose of complying with the restrictions under Securities ActRule 903(b)(2) that:
   
  • an offer or sale, if made prior to the expiration of the 40-day distribution compliance period, will not be made to a U.S. person or for the account or benefit of a U.S. person other than a distributor; and
     
  • if selling the securities to a distributor, dealer or person receiving a selling concession, fee or other remuneration prior to the expiration of the 40-day distribution compliance period, the broker or client will notify such distributor, dealer or other person that it may not sell the securities to a person in the United States or to a U.S. person, as defined by Securities Act Rule 902(k).

In arriving at these positions, we note that, when promulgating Rules 903(a)(1) and 903(b)(2) of Regulation S, the Commission did not specify the procedures that a party would have to take to ascertain or establish a reasonable belief that:

• at the time a buy order is originated, the buyer is outside the United States for purposes of the "offshore transaction" requirement applicable for both Category 1 and 2 offerings; and
   
• no offers or sales to U.S. persons occur prior to the expiration of the 40-day distribution compliance period for Category 2 offerings.

Instead, the Commission noted that sellers should determine the reasonable steps necessary to confirm the offshore location of the buyer and the non-U.S. person status of the beneficial holder.

For example, when proposing the “offshore transaction” definition, the Commission stated, in relevant part, that “[t]he offshore transaction requirement would thus impose a positive obligation on sellers and their agents to ensure (by whatever means they consider satisfactory) that the buyer is outside the United States at the time the buy order is originate[d]. . .” (emphasis supplied).^[1]  Similarly, when adopting Regulation S’s Category 2 provisions, the Commission stated that “[p]ersons relying on the second issuer safe harbor category are required to ensure (by whatever means they choose) that any non-distributor to whom they sell securities is a non-U.S. person and is not purchasing for the account or benefit of a U.S. person” (emphasis supplied).^[2]

These positions are based on the representations made to the Division in your letter. Any different facts or conditions might require the Division to reach different conclusions.

Sincerely,

Elliot Staffin
Special Counsel

Incoming Letter:

The Incoming Letter is in Acrobat format.

http://www.sec.gov/divisions/corpfin/cf-noaction/2014/on-market-bookbuilds-reg-s-111314.htm