Regarding U.S. securities law

[Kees]

Salutations all:
I've been looking for any securities laws governing international
agreements and cannot seem to find the pertinent info; the closest I
got was the possibility of determining that there is no such law. .
.yet. Can anyone in this discussion group answer the following two
questions? Below is a scenario so as to give an accurate example of
what I'm speaking about:

Definition of sides:
Acme - a U.S. based company residing and registered in e.g.: WA State
(where I reside)
Creditanstalt - a German based company registered in Germany.
Hans - a German Citizen residing in Germany.


Q1: Can Acme buy the shares of Creditanstalt (via Int'l Sales
Agreement) and resell them to Hans (via another Int'l Sales Agreement)
, without violating any U.S. laws ? (German laws are irrelevant to this
question).

Q2: Does Acme need a U.S. broker's license to do the above ? (If yes -
what U.S. law mandates it? )

[NC]

Post by Kees
Acme - a U.S. based company residing and registered
in e.g.: WA State (where I reside)
Creditanstalt - a German based company registered in Germany.
Hans - a German Citizen residing in Germany.

If memory serves, Creditanstalt is an Austrian company, a subsidiary of
Germany's HVB Group, which in turn recently merged with Italy's
UniCredit.

If you use Creditanstalt as a fictitious name, there is still one
missing piece of information: is it publicly traded and if so, where?
Another missing piece is, who is the seller: is it the company itself
or one of existing shareholders? In other words, are we dealing with
securities offering or not?

Post by Kees
Q1: Can Acme buy the shares of Creditanstalt (via Int'l Sales
Agreement) and resell them to Hans (via another Int'l Sales
Agreement), without violating any U.S. laws ?

Acme can buy, but it's possible the seller (whoever they are) may or
may not be allowed to sell. If, for example, Creditanstalt is
conducting a private placement of its stock under Rule 144-A, it only
may sell to Acme if Acme is a qualified institutional buyer ($100
million or more in assets under management). If that's the case and
Acme buys, it assumes an obligation to sell only to other qualified
institutional buyers. In other circumstances, Creditanstalt may have
to register the offering with SEC or limit avaiability of the offering
to accredited investors:

http://www.sec.gov/answers/accred.htm

The least restrictive situation is if shares were sold by an existing
shareholder, so the situation is not likely to be deemed a securities
offering.

Post by Kees
(German laws are irrelevant to this question).

No, they are not, since Hans is a resident of Germany. If Germany
doesn't like the way you treated Hans, it may ask for your extradition.

Post by Kees
Q2: Does Acme need a U.S. broker's license to do the above ?
(If yes - what U.S. law mandates it? )

Since Acme did acted as a pricipal, not as a broker (it sold Hans
shares it actually owned), there's no need to have a broker license.

Cheers,
NC

[Kees]

Hi, NC, I've interlaced replies to your message. By the way, thanks a
lot!

Creditanstalt is a name used by hundreds of companies in various
countries, it is the German equivalent of "Acme". Maybe the first one
was in Austria.

Post by NC
If you use Creditanstalt as a fictitious name, there is still one
missing piece of information: is it publicly traded and if so, where?

Yes, it is publicly traded in Germany.

Post by NC
Another missing piece is, who is the seller: is it the company itself
or one of existing shareholders? In other words, are we dealing with
securities offering or not?

Company itself.

Post by NC

Post by Kees
Q1: Can Acme buy the shares of Creditanstalt (via Int'l Sales
Agreement) and resell them to Hans (via another Int'l Sales
Agreement), without violating any U.S. laws ?

Acme can buy, but it's possible the seller (whoever they are) may or
may not be allowed to sell. If, for example, Creditanstalt is
conducting a private placement of its stock under Rule 144-A, it only
may sell to Acme if Acme is a qualified institutional buyer ($100
million or more in assets under management).

Assume seller can sell.

Cheers,

Kees

[NC]

Post by Kees

Post by NC
is it publicly traded and if so, where?

Yes, it is publicly traded in Germany.

Post by NC
Another missing piece is, who is the seller: is it
the company itself or one of existing shareholders?
In other words, are we dealing with securities
offering or not?

Company itself.

So we ARE dealing with a securities offering... Which leads me to the
next question: does the company have shareholders' or Board's approval
to issue the additional stock?

Post by Kees

Post by NC
Acme can buy, but it's possible the seller (whoever
they are) may or may not be allowed to sell. If, for
example, Creditanstalt is conducting a private
placement of its stock under Rule 144-A, it only
may sell to Acme if Acme is a qualified institutional
buyer ($100 million or more in assets under
management).

Assume seller can sell.

I can't, and neither should you. Since this is an offering (and by a
publicly traded company, no less), either Creditanstalt must file a
prospectus with the SEC or Acme must be a qualified institutional
buyer.

Cheers,
NC

[Kees]

Post by NC
So we ARE dealing with a securities offering... Which leads me to the
next question: does the company have shareholders' or Board's approval
to issue the additional stock?

Yes, it does have the Board's approval.

So therefore, there should be no problems with this scenario (the
"Acme-Creditanstalt" example)? That is, assuming (having established)
that the respective companies may buy/sell (having met internal
requisites, conditions) without violating any U.S. laws?

Again, "German laws are irrelevant to this question" rather means that
there are no legal conflicts on the German side (the same applies to
shareholders' or Board's approval on both sides), and NOT that there is
intent to disregard German law; the primary question is regarding the
international purchase/sale of shares without violating any U.S. laws.
It is assumed that German laws would permit these transactions.

[NC]

Post by Kees

Post by NC
So we ARE dealing with a securities offering... Which
leads me to the next question: does the company have
shareholders' or Board's approval to issue the additional
stock?

Yes, it does have the Board's approval.

What about shareholders? More specifically, why would shareholders
agree to sell newly-issued stock to a private party, rather than in the
public market, which, as you claim, exists? Is the selling price
higher than in the public market? If so, why does Acme want to buy the
stock privately rather than in the public market? Assuming this is an
actual transaction, it seriously smacks of securities fraud that could
eventually be prosecuted in Germany... Some kind of self-dealing in
disguise...

Post by Kees
So therefore, there should be no problems with this
scenario (the "Acme-Creditanstalt" example)?

There may be. Unless Acme is a qualified institutional buyer,
Creditanstalt would be in violation of U.S. securities laws, because it
allowed an unqualified buyer to participate in a private placement.

Cheers,
NC

[Kees]

Post by NC
What about shareholders? More specifically, why would shareholders
agree to sell newly-issued stock to a private party, rather than in the
public market, which, as you claim, exists? Is the selling price
higher than in the public market? If so, why does Acme want to buy the
stock privately rather than in the public market? Assuming this is an
actual transaction, it seriously smacks of securities fraud that could
eventually be prosecuted in Germany... Some kind of self-dealing in
disguise...

The question "why" is irrelevant to the query, but if you must know,
the company does not sell small quantities of shares, only large
bundles. I don't see how this could be fraudulent.

Cheers,

Kees