The independent financial advisory space in the United States is fast evolving. The government is tightening the regulations to protect the citizens’ assets, securities, and investments. As a foreign broker dealer, you may find it challenging to penetrate the local market and offer your investment products.
The SEC rule 15a-6 of the Securities Exchange Act of 1934 provides foreign brokerage firms with exceptions through which they can discuss securities with certain US institutional investors without registering as a US broker dealer. The rules allow the foreign entities to work with a US certified broker dealer as a “chaperon.”
Chaperoning Services Under SEC Rule 15a-6
Registered broker dealers in the US allow easier access for foreign brokerage firms to US institutional investors, abiding by the regulations stipulated. The chaperoning arrangement allows foreign broker dealers to solicit and effect transactions with USII and MUSII through the SEC-certified broker dealers. The chaperone also maintains all books and records as stipulated under SEC Rule 15a-6. Here are some tips for choosing the right us broker dealer chaperone:
You may need to assess the level of understanding of the SEC-registered broker dealer to the regulations set under SEC Rule 15a-6. The regulatory framework is quite complex, and the right partner can ensure that the chaperoning agreement remains within the law. Errors, mistakes, or misdeeds may result in costly litigation processes with the potential for punitive fines. Ensure that the firm meets the set guidelines by the Securitas and Exchange Commission.
Communication is a key pillar of the relationship that you establish with the certified broker dealer. You may need to have a rapport with the strategic advisor provided to oversee your transactions within the US. The chaperone may also require an up-to-date record of transactions and reports are done. Transparency may lead to easier sharing of crucial data and information.
The US broker deal needs to have extensive experience in international trading, mergers and acquisitions, as well as investment banking. The broker should have invested in the latest technology and tools to facilitate soliciting and effecting transactions. The firm should be ready to provide direction when issues arise.
4. Culture and Values
With the chaperone having a burden of responsibility on the transactions done, they may be present in most engagements. As such, you may need to find a broker dealer that aligns with your values and beliefs as a foreign entity. Most firms may offer a chance to meet the various departments that may be involved in the chaperoning agreement. This interaction may provide you with an opportunity to determine whether you can cultivate a long-term relationship with the US brokerage firm.
You may need to consider what other clients that underwent through the chaperoning program with the broker dealer speak of the services provided. You can request references to past clients that the broker dealer has worked with. Follow up on the contacts provided, paying attention to the overall experience, the support provided, and communication.
The SEC Rule 15a-6 allows foreign broker dealers to partner with US brokerage firms through a chaperoning agreement to solicit and effect transactions. If you are searching for a certified broker dealer to become your chaperone or looking for broker dealer sponsorship, reach out to Bridge Capital Associates.