On Dec. 8, 2016, the SEC Division of Corporation Finance issued six new CDIs applicable to Regulation S under the Securities Act, which provides a registration exemption for the issuance of securities in offshore transactions to persons other than “U.S. persons.” A U.S. person includes “any natural person resident in the United States.” The SEC has provided guidance that a person with permanent resident status in the United States (i.e., a Green Card holder) will be presumed to be a U.S. resident. Additionally, other persons, while lacking permanent resident status, may be deemed U.S. residents. The SEC has stated that an issuer must use its own criteria to determine residency and apply that criteria without changing it to achieve a desired result. Factors that an issuer may apply include tax residency, nationality, mailing address, physical presence, the location of a significant portion of financial and legal relationships, and immigration status.

Additionally, the SEC has clarified that:

  • Rule 903(b)(1)(ii) may be relied upon to issue securities into more than one country within the European Union;
  • Rule 903(b)(1)(iv) may be relied upon for an offering of securities to employees if the laws, customary practices and documentation are those of the European Union (rather than of a country other than the United States);
  • the SEC’s guidance with respect to establishing whether offers and sales are not made to, or for the account or benefit of, a U.S. Person for purposes of Category 2 offerings may also be applied to Category 3 offerings;
  • where Regulation S requires certifications and agreements, issuers and distributors may use electronic procedures to obtain the certifications and agreements, and these processes may be implemented by third parties and issuers, and distributors may rely on those procedures to the same extent and in the same manner as when certifications and agreements are obtained in paper; and
  • Rule 903(b)(4) relating to guaranteed debt securities applies both in situations when the parent company is the issuer (or a co-issuer) of the debt securities and one or more subsidiaries is a guarantor, and when the parent company is a guarantor and there are one or more subsidiaries which are also guarantors of the securities, in each case as long as the payment obligation of the parent company is full and unconditional.

https://www.sec.gov/divisions/corpfin/guidance/securitiesactrules-interps.htm (CDIs 276.01; 277.02 through 277.06