ORDER GOVERNING TRANSACTIONS BY FOREIGN BROKER-DEALERS EXEMPT FROM FEDERAL REGISTRATION AND TRANSACTIONS EXEMPT UNDER SEC RULE 237
WHEREAS the Commissioner of Banking (the "Commissioner") is charged with administering Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act, as amended by P.A. 00-61, (the "Act") and Sections 36b-31-2 et seq. of the Regulations of Connecticut State Agencies (the "Regulations") promulgated under the Act;
WHEREAS Section 36b-31(a) of the Act provides that "[t]he commissioner may from time to time make ... such ... orders as are necessary to carry out the provisions of sections 36b-2 to 36b-33, inclusive, including ... orders governing registration statements, applications, and reports, and defining any terms, whether or not used in said sections, insofar as the definitions are not inconsistent with the provisions of said sections. For the purpose of ... orders, the commissioner may classify securities, persons and matters within his jurisdiction, and prescribe different requirements for different classes.";
WHEREAS Section 36b-31(b) of the Act adds that "[n]o ... order may be made, amended or rescinded unless the commissioner finds that the action is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of sections 36b-2 to 36b-33, inclusive. In prescribing ... orders the commissioner may cooperate with the securities administrators of the other states and the Securities and Exchange Commission with a view to effectuating the policy of said sections to achieve maximum uniformity in the form and content of registration statements, applications and reports wherever practicable.
WHEREAS Section 36b-6(a) of the Act provides, in part, that "[n]o person shall transact business in this state as a broker-dealer unless he is registered under ... [the Act]. No individual shall transact business as an agent in this state unless he is ... registered as an agent of the broker-dealer ... whom he represents in transacting such business";
WHEREAS Section 36b-3(5) of the Act states, in part, that the term "broker-dealer" means "any person engaged in the business of effecting transactions in securities for the account of others or for his own account. 'Broker-dealer' does not include ... (E) such other persons not within the intent of this subdivision as the Commissioner may by ... order determine";
WHEREAS the United States Securities and Exchange Commission (the "SEC") has promulgated Rule 15a-6 under the Securities Exchange Act of 1934 (the "'34 Act") exempting foreign brokers and dealers engaging in specific transactions from the registration requirements of Sections 15(a)(1) and 15B(a)(1) of the '34 Act;
WHEREAS Rule 15a-6 would exempt, without limitation, a foreign broker-dealer engaging in one or more of the following transactions: 1) effecting transactions in securities with or for persons that have not been solicited by the foreign broker or dealer; 2) subject to certain conditions, inducing or attempting to induce the purchase or sale of any security by a "U.S. institutional investor" or a "major U.S. institutional investor" as those terms are defined in the rule; and 3) effecting transactions in securities with or for, or inducing or attempting to induce the purchase or sale of any security by a foreign person temporarily present in the United States with whom the foreign broker or dealer had a bona fide, pre-existing relationship before the foreign person entered the United States;
WHEREAS on June 7, 2000, the SEC entered an Order (hereinafter, the "Canadian Broker-dealer Order") granting Canadian broker-dealers servicing "Canadian Retirement Accounts", as defined in Rule 237 under the Securities Act of 1933 (the "'33 Act") a narrow exemption from the broker-dealer registration requirement in Section 15(a)(1) of the '34 Act to enable them "to conduct activities necessary to allow individuals, who have established Canadian Retirement Accounts and later moved to the U.S., to effectively manage the assets in those accounts" (Release No. 34-42906);
WHEREAS Section 36b-16 of the Act provides, in part, that: "No person shall offer or sell any security in this state unless (1) it is registered under sections 36b-2 to 36b-33, inclusive, (2) the security or transaction is exempted under section 36b-21, or (3) the security is a covered security provided such person complies with any applicable requirements in subsections (c), (d) and (e) of section 36b-21";
WHEREAS Section 36b-21(b)(17) of the Act provides that: The following transactions are exempted from sections 36b-16 and 36b-22 ... any other transaction that the commissioner may exempt, conditionally or unconditionally, on a finding that registration is not necessary or appropriate in the public interest or for the protection of investors";
WHEREAS the SEC has promulgated Rule 237 exempting from the securities registration requirements of Section 5 of the '33 Act offers and sales of Eligible Securities, as defined in the Rule to certain Canadian tax-deferred retirement accounts, including, without limitation Registered Retirement Savings Plans and Registered Retirement Income Funds administered and established under Canadian law to provide for qualified tax-deferred treatment;
WHEREAS the Commissioner finds that the entry of this Order, which recognizes the increasing globalization of the securities markets and the need for state and federal uniformity, is necessary or appropriate in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act";
WHEREAS the Commissioner determines, pursuant to Section 36b-3(5)(E) of the Act, that those broker-dealers meeting the criteria set forth in this Order do not fall within the intent of Section 36-3(5) of the Act;
WHEREAS the Commissioner also finds that the registration under Section 36b-16 of the Act of securities transactions effected in accordance with SEC Rule 237 is not necessary or appropriate in the public interest or for the protection of investors.
NOW THEREFORE, THE COMMISSIONER ORDERS AS FOLLOWS:
| (1) | For purposes of this Order, the following definitions shall apply: | |
| (A) | "Foreign Broker-dealer" has the meaning given to "foreign broker or dealer" in SEC Rule 15a-6(b)(3) where the securities activities of such broker-dealer would trigger Connecticut jurisdiction under Section 36b-33 of the Act; | |
| (B) | "Eligible Canadian Broker-dealer" means a broker-dealer based in Canada which is subject to the SEC's Canadian Broker-dealer Order and which proposes to conduct securities activities that would trigger Connecticut jurisdiction under Section 36b-33 of the Act; | |
| (C) | "Canadian Retirement Account" has the meaning given to that term in SEC Rule 237(a)(2), i.e., a trust or other arrangement, including, but not limited to, a "Registered Retirement Savings Plan" or "Registered Retirement Income Fund" administered under Canadian law, that is managed by the Participant, operated to provide retirement benefits to a Participant and established in Canada, administered under Canadian law, and qualified for tax-deferred treatment under Canadian law; | |
| (D) | "Participant", when used in the context of Canadian Retirement Accounts, shall have the meaning in SEC Rule 237(a)(6), i.e., a natural person who is a resident of the United States, or is temporarily present in the United States, and who contributes to, or is or will be entitled to receive the income and assets from, a Canadian Retirement Account; | |
| (E) | "Eligible Security", as applied to Canadian Retirement Accounts, shall have the meaning given to that term in SEC Rule 237(a)(3) and shall be limited to securities of qualified foreign issuers in accordance with that rule; | |
| (2) | The term "broker-dealer" in Section 36b-3(5) of the Act shall not be deemed to include a Foreign Broker-dealer not otherwise excluded under Section 36b-3(5) of the Act that qualifies for a federal exemption from registration under SEC Rule 15a-6; | |
| (3) | The term "broker-dealer" in Section 36b-3(5) of the Act shall not be deemed to include Eligible Canadian Broker-dealers effecting securities transactions exclusively for Participants in Canadian Retirement Accounts in accordance with the SEC's Canadian Broker-dealer Order, where compliance is observed with all terms and conditions of that order, including restrictions on advertising and solicitation and the requirement that Participants receive disclosure at least annually concerning the fact that Canadian Retirement Accounts are not regulated under United States securities laws and that the Eligible Canadian Broker-dealer is not subject to U.S. broker-dealer regulation; | |
| (4) | Offers to Participants or sales to their Canadian Retirement Accounts, of Eligible Securities exempt from federal registration under SEC Rule 237 shall also be exempt from Connecticut securities registration pursuant to Section 36b-21(b)(17) of the Act; | |
| (5) | The antifraud provisions of Section 36b-4 of the Act shall continue to apply to any Foreign Broker-dealer or Eligible Canadian Broker-dealer excluded from the definition of "broker-dealer" pursuant to this Order; and | |
| (6) | This Order shall remain in effect until vacated, modified or superseded by the Commissioner or other legal authority. | |
So ordered at Hartford, Connecticut
this 17th day of August, 2000.
John P. Burke
Banking Commissioner