Regulation S - Explained
What is Regulation S?
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What is Regulation S?
Regulation S is a safe harbor provision that exempts offshore securities from registration under section 5 of the Securities Act of 1933.
How does Regulation S Work?
Regulation S provides two safe harbors including:
- An issuer safe harbor
- A resale safe harbor
Under the regulation, both safe harbors apply to offers and sales of securities made outside of the shores of the United States. It also prohibits offering participants such as the issuer, affiliates and assisting banks from engaging in directed selling efforts. The regulation demands that where the US market shows a substantial interest in an issuers securities, U.S. persons (including Americans not physically present in the U.S.) cannot take part in the offers and sales.
Academic Research on Regulation S
- Offshore Distributions Under the Securities Act of 1933: An Analysis of Regulation S, Wolff, S. (1992). Law & Pol'y Int'l Bus., 23, 101. This article explains Regulation S and its role in the sales of securities.
- The Unfounded Fear of Regulation S: Empirical Evidence on Offshore Securities Offerings, Choi, S. J. (2000). Duke LJ, 50, 663. This paper examines the failures of Regulation S as a mechanism for curbing illegal transactions among U.S. investors regarding offshore securities. It posits that Regulation S must address the risk facing investors in the United States and reduce regulation of securities offered outside of the U.S.A
- Global and local information asymmetries, illiquidity and SEC Rule 144A/Regulation S: The case of Indian GDRs, Pinegar, J. M., & Ravichandran, R. (2002). Journal of banking & finance, 26(8), 1645-1673. In this paper, researchers look at the impact of the SEC Rule I44A on Indian-issued GDRs. The study concludes that GDR issuance boosts investor recognition of underlying shares even when the concerned securities are exempted from heavy scrutiny such as required of foreign firms.
- Regulation S and Rule 144A: creating a workable fiction in an expanding global securities market, Steinberg, M. I., & Lansdale Jr, D. L. (1995). In Int'l L. (Vol. 29, p. 43). This article examines the safe harbor status of securities that fall under the category of Regulation S.
- Offshore Distribution of Securities: The Impact of Regulation S, Berger, D. (1990). Transnat'l Law., 3, 575. This piece looks at the impact of Regulation S on the distribution of offshore securities and the participation of U.S. investors.
- Evasion and Flowback in the Regulation S Era: Strengthening US Investor Protection While Promoting US Corporate Offshore Offerings, Futterman, J. (1994). Fordham Int'l LJ, 18, 806. This paper studies the role of Regulation S regarding investor protection and issuer access. It posits that the regulation has contributed to the flowback of unregistered securities into the U.S. and recommends that the SEC find a common ground where the interests of local investors and offshore issuers are well protected.
- Regulation S-Securities Offerings Outside the United States, Lander, G. P. (1995). NCJ Int'l L. & Com. Reg., 21, 339. In this article, the author examines how Regulation S affects securities offerings outside of the United States and its impact on local investors.
- Asset-Backed Securities: Secondary Market Implications of SEC Rule 144A and Regulation S, Tevis, J. B. (1991). Pac. LJ, 23, 135. This study analyzes the impact of SEC Rule 144A and Regulation S on asset-backed securities offered on the secondary markets.
- The SEC and Internationalization of Capital Markets: Herein of Regulation S and Rule 144A-Part II, Bloomenthal, H. S. (1990). Denv. J. Int'l L. & Pol'y, 19, 343. In this piece, the author examines the role of the SEC in international capital markets, with emphasis on Regulation S and Rule 144a.
- Direct Regulation S Offereings and the SEC's Problematic Practices Release, Hanks, S. (1995). Stan. JL Bus. & Fin., 2, 303. This article looks at the challenges associated with implementing the safe harbor concept under the Regulation S of the SEC.
- Regulation S and Offshore Capital: Will the New Amendments Rid the Safe Harbor of Pirates, Jordan, J. B. (1998). Nw. J. Int'l L. & Bus., 19, 58. This article aims to analyze the effect of the reforms to Regulation S on offshore securities. The author asks whether the new amendments are enough to curb illegal activities in the offering and sales of unregistered offshore capital.