Friday, March 6, 2009

Friday Q&A: Can I sell stocks in a foreign country?

Friday Q&A - I am licensed in the US with all of the applicable securities licenses. I would like to being servicing customers in England, France and Spain. Do I need any additional licenses?

Having a license to provide investment advice in the United States does not mean that you can automatically charge for that advice everywhere else. Most countries (though not all) have their own securities laws and rules which govern the activities of persons offering or selling securities in their country. Many countries have adopted regulations similar to those in the United States, some have very different regulations, and others have very few.

Despite the fact that you do not reside in the foreign country, you need to comply with their regulations regarding the offer and sale of securities. It might be tempting to believe that a US broker-dealer is beyond the reach of a foreign securities regulators, but that is simply not the case, as doing business in a foreign country subjects you to the jurisdiction of that country. This issue is really just theoretical, since FINRA and the SEC may consider violation of another country's securities laws a violation of US securities laws.

FINRA has previously released two Notices to Members regarding these issues. The first, NASD Notice to Members 98-91, was titled "NASD Alerts Members To Their Obligations Concerning Cold Calling And Advertising To Persons In The United Kingdom" and was apparently released by the NASD at the request of the securities regulators in the United Kingdom. Two years later a second Notice to Members was released, again reminding members of their obligations in foreign countries. NASD Notice to Members 00-02 - NASD Alerts Members To Their Obligations Concerning Soliciting Business In Foreign Jurisdictions.

On December 10, 2001, the NASD released NASD Notice to Members 01-81 titled "NASD Provides Interpretive Guidance On The Conduct Of Business Abroad." The release is an attempt to provide an overview and interpretation of the NASD's rules regarding overseas operations, and is in a question and answer format, dealing with some of the more common issues in foreign business operations.

Current NASD rules on the topic include:

* The NASD permits firms to register certain persons working in foreign offices as Foreign Associates without requiring qualification examinations (NASD Rule 1100).

* The NASD authorizes member firms to maintain registrations for persons who are engaged in the investment banking or securities business of a foreign securities affiliate or subsidiary (NASD Rules 1021(a) and 1031(a)).

* The NASD allows, in limited circumstances, member firms and persons associated with a member to pay transaction-related compensation to non- registered foreign persons, or foreign finders (NASD Rule 1060(b)).

* The NASD permits persons registered in certain foreign countries to work in the U.S. as general securities representatives after taking an abbreviated examination (NASD Rule 1032).

A careful reading of the Notice, and other comments from the NASD reflect a growing concern with operations in foreign countries. Readers are advised to move carefully into these markets, as violation of the applicable regulations can subject one to civil and criminal prosecution in the foreign country, as well as disciplinary action in the United States.





Reblog this post [with Zemanta]
Post a Comment