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Raising Capital Across Borders – The Foreign Broker-Dealer Chaperoning Solution

Daniel Hayes  | 

The US is one of the most robust and attractive sources of capital across the globe. At the same time, the US securities regulatory environment is among the costliest and most burdensome to navigate. This is a dilemma for foreign BDs looking to raise capital from the US in an efficient and affordable manner. A possible solution? – SEC Rule 15a-6.

Image depicting how foreign broker-dealers can engage with U.S. investors in the U.S. market, including compliance requirements and permitted activities.

What is SEC Rule 15a-6?

There are two paths to the US capital markets from abroad. The first option, the foreign BD can set up shop in the US, registering with the SEC as a FINRA member Broker-Dealer. This can take about 9 months and can cost, at minimum, approximately $1 million. In this scenario they must not only ensure compliance of their home jurisdiction’s securities laws and regulations but do the same within the US regulatory landscape.

The other option; operate under SEC Rule 15a- 6 engaging with an existing US broker dealer as a chaperone to conduct securities business in the US. 15a-6 provides a framework in which foreign BDs can raise capital from US investors without registering with the SEC if certain criteria are met.

Permitted Activities under Rule 15a-6

15a-6 permits foreign BDs to conduct certain limited activities in the United States and with U.S. investors, provided that such activities are supervised by the US Chaperoning Broker Dealer.

(i) Effecting unsolicited transactions from any US investor, retail or institutional

(ii) Providing research reports to certain US institutional investors with under $100 million in investment assets, so long as they do not recommend a security or transaction.

(iii) Effecting solicitated transactions from Major US Institutional Investors owning investment assets of over $100 million

Chaperoning Broker-Dealer Services: A Comprehensive List

Utilizing a 15a-6 Chaperone allows the foreign BD to focus on complying with their own country’s laws and outsourcing a US-based BD to utilize their expertise stateside. Below is a list of typical services provided by a Chaperoning Broker-Dealer:

1. Client Onboarding and Due Diligence

2. Engagement Letter Review

3. Transaction Facilitation

4. Regulatory Compliance and Reporting

5. Client Communication Review and Approval

6. Recordkeeping and Documentation

7. Compliance Expertise

8. Training and Development

9. Audit Support

FNEX Capital offers SEC Rule 15a-6 Chaperoning Services for foreign broker-dealers looking to raise capital from Major US Institutions. Our experienced team guides you through the regulatory landscape, ensuring compliance while you focus on your business. Contact us HERE to get in touch with our team, or email us at info@fnex.com.

This article is written by Daniel Hayes. Mr. Hayes is FNEX Director of Compliance and has a diverse background in the brokerage industry with over 10 years of experience. He has worked in derivatives trading and risk management, pre-arbitration resolution and settlement, alternative investment suitability, KYC/AML compliance, and has managed multiple teams of financial professionals. Mr. Hayes has a Finance/Economics Degree from Indiana State University and FINRA Series, 7, 66, 9/10, 4, and 3 licenses.