Investment regulation - U.S.A.

05.10.2012

Holding restrictions

Obligation to report threshold crossings

All investors, resident or non-resident, who acquire a 5% or greater share of one class of an equity issue, must disclose the specifics of the transaction directly to the SEC within 10 calendar days of acquisition (Rule 13D of the Securities Exchange Act 1934). No intermediation from Clearstream is required.

Every investment manager that exercises investment discretion with respect to account holding section 13(F) securities, as defined in rule 13, having an aggregate fair market value on the last trading day of any month of any calendar day of at least USD 100 million shall file a report on form 13F with the SEC within 45 calendar days after the last day of such calendar year and within 45 calendar days after the last day of each of the first three calendar quarters of the subsequent calendar year (Rule 13F-1 of the Securities Exchange Act 1934). No intermediation from Clearstream is required.

Please refer to the Securities Exchange Act 1934 for details of sanctions in case of non-compliance.

Foreign ownership restrictions

Restrictions on direct foreign investment in certain industries exist, such as aviation, banking, communications, defence, energy, mining, real estate, etc. The list is non-exhaustive.

Certain provisions prevent direct investment in such industries, while other provisions allow them to do so under guided circumstances.

Short selling

Various measures have been put in place by regulators to preserve investor confidence and promote market stability. Among key measures:

  • SEC Rule 204: this rule is part of the SEC's efforts to curtail potential "naked" short selling abuses and reduce fails to deliver.
  • SEC Rule 201: this rule puts in place certain restrictions on short selling when a stock price has dropped more than 10 percent in one day.

Disclosure requirements

Please refer to the Disclosure Requirements.

Insider trading legislation

Law

Section 17 of the Securities Act of 1933 contained prohibitions of fraud in the sale of securities which were greatly strengthened by the Securities Exchange Act of 1934.

Section 16(b) of the Securities Exchange Act of 1934 prohibits short-swing profits (from any purchases and sales within any six month period) made by corporate directors, officers, or stockholders owning more than 10% of a firm's shares. Under Section 10(b) of the 1934 Act, SEC Rule 10b-5, prohibits fraud related to securities trading.

The Insider Trading Sanctions Act of 1984 and the Insider Trading and Securities Fraud Enforcement Act of 1988 provide for penalties for illegal insider trading to be as high as three times the profit gained or the loss avoided from the illegal trading.

SEC regulations

SEC regulation “Full Disclosure” requires that if a company intentionally discloses material non-public information to one person, it must simultaneously disclose that information to the public at large.

Insider trading, or similar practices, are also regulated by the SEC under its rules on takeovers and tender offers under the Williams Act.

Court decisions

Much of the development of insider trading law has resulted from court decisions.