May, 1998
Internet Offerings for Foreign Issuers
The U.S. Securities and Exchange Commission ("SEC") has recently taken the position that non-U.S. companies which offer to sell securities on their Internet Web sites can be subject to the registration requirements the Securities Act of 1933 (the "1933 Act") if the offering is deemed to have been made to persons in the U.S. Where, however, offerors implement adequate measures to prevent U.S. persons from participating in an offshore Internet offer, the SEC will not view the offer as targeted at the United States and thus would not treat the offering as occurring in the United States, in which case it would not be subject to the 1933 Act.
On March 23, 1998, the SEC issued an Interpretive Release on the issue. It stated that it generally would not consider an offshore Internet offer made by an off-shore offeror to be targeted at the U.S. if:
"[t]he Web site includes a prominent disclaimer making it clear that the offer is directed only to countries other than the United States . . . and [t]he Web site offeror implements procedures that are reasonably designed to guard against sales to U.S. persons in the offshore offering."
As example of first of these measures, the SEC indicated that "the Web site could state that the securities or services are not being offered in the United States or to U.S. person, or it could specify those jurisdictions (other than the United States) in which the offer is being made." As an example of the second measure, the SEC indicated that "the offeror could ascertain the purchaser's residence by obtaining such information as mailing addresses or telephone numbers (or are code) prior to the sale [in order to] allow the offeror to avoid sending or delivering securities, offering materials services or products to a person with a U.S. address or telephone number." The SEC stated that the adequacy of the measures will depend on the facts and circumstances of the particular situation.
However, even if an offshore issuer implements these precautions, the issuer could still be subject to the registration requirements of the U.S. securities laws if the issuer offers of sells securities to a person for whom the issuer has information that would put the issuer on notice that the purchaser was a U.S. person. Examples of information that would put the issuer on notice include: receipt of payment drawn on a U.S. bank, provision of a U.S. taxpayer identification or social security number or statements indicating that the person is a U.S. resident.
Offshore companies which are making offshore offerings concurrently with private offerings to U.S. residents must also take steps to insure that any Web site postings are not used as a means to locate investors to participate in private U.S. offerings. Thus, if the issuer allowed unrestricted access to its offshore Internet offering materials, it should not sell securities in a private offering to any U.S. person who responded over the Internet. Alternatively, the offshore issuer could decline to provide information over the Internet to U.S. persons by requiring that viewers provide residence information before being permitted to view information.
« archived newsletters