The Securities and Exchange Commission has approved policy statements of the National Securities Clearing Corporation (NSCC) and Depository Trust Company (DTC) to admit entities not subject to U.S. federal or state regulation.Both require that the applicant show that it meets the membership financial requirements by submitting audited financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP). If the financial statement is prepared in accordance with International Financial Reporting Standards, UK GAAP or Canadian GAAP it must show a premium of 1½ times the existing requirement. If the financial statement is prepared in accordance with European Union GAAP, other than UK GAAP, it must show a premium of 5 times the existing requirement. Financial statements prepared in accordance with any other GAAP must show a premium of 7 times the existing requirement. Both DTC and NSCC require the foreign entity to be subject to regulation in its home country and to be in good standing with its home country regulator. NSCC also requires that there be a Memorandum of Understanding between the SEC and the foreign entity’s home country regulator.
In addition to requiring execution of the standard Membership Agreements, NSCC requires the foreign entity enter into a series of undertakings and agreements, including waiving immunity from NSCC’s attachment of its assets in the U.S. Each foreign entity would submit an opinion of reputable foreign counsel confirming enforceability of NSCC’s Policy Statement against the foreign entity in the courts of its home country or other jurisdictions where the foreign entity or its property may be found.
DTC will not require special financial controls beyond its net debit cap, collateral monitor and other risk management controls applicable to all members. DTC will require the foreign entity to provide sufficient information to permit DTC to evaluate any anti-money laundering risk it may pose.