Even in the current environment, globalized financial markets are increasingly presenting financial institutions and companies with opportunities to invest and grow their businesses internationally through cross-border transactions. A number of well-known factors continue to drive this trend, including technology, competition, flows of investment and evolving regulatory regimes that permit greater access to markets outside a company’s home country jurisdiction. However, these new opportunities can be accompanied with new—and sometimes hidden—regulatory concerns for the financial institutions advising the parties involved in cross-border transactions.
Financial institutions located and operating from outside the United States (generally referred to herein as “foreign” firms) should be aware that their activity in connection with cross-border merger and acquisition transactions involving a U.S. party may inadvertently trigger U.S. federal broker-dealer registration requirements, even where the foreign firm is representing a non-U.S. party to the transaction. Failure to register when required to do so may lead to scrutiny and potential enforcement action by the U.S. Securities and Exchange Commission, not only with respect to the foreign firm but also with respect to any U.S.-based entities (regardless of their U.S. registration status) involved in the transaction. This publication is intended to summarize potential options for foreign financial institutions involved in cross-border M&A transactions to avoid U.S. broker-dealer registration and mitigate potential enforcement risks.