CFTC

In general, a financial intermediary will be deemed to be subject to CFTC regulation if it either is legally domiciled in the U.S., is otherwise physically present in the U.S., has consented to jurisdiction or is deemed to be conducting business in the U.S. Whether a financial intermediary is deemed to be conducting business in the U.S. is not dependent on whether the financial intermediary is physically present in the U.S. and no distinction between solicited and unsolicited business is made; mere acceptance of orders constitutes "doing business."

The presence of a U.S. affiliate of a foreign firm engaged in a related business may also cause the CFTC to find that the foreign firm is subject to regulation in the U.S. Adequate representations as to access to the U.S. affiliate's books and records may cause the CFTC to disregard the affiliate's presence in applying the CFTC's regulatory requirements.

The location of the customer has influenced CFTC staff determinations as to whether a financial intermediary must register:

- Introduction of Orders by Rule 30.10 Firm for Certain Customers - For example, in February 1993, CFTC staff granted registration relief to a U.K. firm exempted under rule 30.10, which proposed to introduce to a U.S. FCM orders of certain U.K. branch offices of U.S. corporations (among other entities) for transactions on U.S. contract markets. Under existing standards, a firm accepting orders from such U.S. customers ordinarily would be required to register. However, relief was granted based in part on the status of the U.S. customer (which must be an institutional customer) of which the branch is a part, the fact that the branch is an independent profit center outside the U.S., the rule 30.10 status of the firm, and the fact that the accounts of each customer would be carried by a U.S. FCM on a fully disclosed basis.

- Order Transmittal for Omnibus Accounts - On September 23, 1992, CFTC staff issued a no-action letter to address order transmittal procedures in instances where a U.S. FCM has a customer omnibus account with an affiliated foreign broker for execution of foreign transactions and the foreign broker has a customer omnibus account with a U.S. FCM for execution of U.S. transactions. No-action relief was granted to permit certain institutional customers direct access to the executing firm carrying the omnibus account. See Interpretative Letter 92-16 [Current Binder] Comm. Fut. L. Rep. (CCH) ¶25,386 (September 23, 1992).

- Globex Branch Offices: "Pass the Book" - On June 25, 1992, CFTC staff granted relief from certain registration requirements that otherwise would apply to CME and CBOT member firms and their foreign affiliates to which they "pass the book" of customer orders for entry into the Globex electronic trading system, and to personnel involved in that process. Staff stated that it will not recommend enforcement action against an exchange member firm solely for soliciting, accepting or entering U.S. customer orders into Globex through certain designated persons located at a foreign affiliate that is not registered as an FCM. The Globex-related activities of the designated persons would be deemed to satisfy CFTC requirements that all sales of U.S. contracts to U.S. customers occur from a branch office of a U.S. registered firm. See Interpretative Letter 92-11 [Current Binder] Comm. Fut. L. Rep. (CCH) ¶25,325 (June 25, 1992).

SEC The Commission requires broker-dealer registration in two general types of situations. First, all broker-dealers physically operating within the United States that effect, induce, or attempt to induce any securities transactions are required to register with the Commission, even if these activities are directed only to foreign investors outside the United States. Second, broker-dealers who solicit securities transactions from persons located in the United States are required to register with the Commission, regardless of where the broker-dealers are located.

The Commission has not required registration of broker-dealers located outside the United States who execute transactions for U.S. persons who sought out the broker-dealer and initiated transactions in foreign securities markets entirely of their own accord. The Commission generally views "solicitation," however, as including any affirmative effort by a broker-dealer intended to induce transactional business for the broker-dealer or its affiliates. Conduct deemed to be solicitation includes telephone calls from a broker-dealer to a customer encouraging use of the broker-dealer to effect transactions, as well as advertising one's function as a broker-dealer, in newspapers or periodicals of general circulation in the United States or on any radio or television station whose broadcasting is directed into the United States. Similarly, solicitation would include conducting investment seminars for U.S. investors or recommending the purchase or sale of particular securities, with the anticipation that the customer will execute the recommended trade through the broker-dealer.

A broker-dealer who disseminates quotations for securities to U.S. persons also generally would be considered to have solicited securities transactions. The Commission has indicated, however, that third-party distribution of quotations will be allowed on an interpretive basis. The Commission's position only applies to third-party systems that do not have internal execution capabilities.

The Commission has adopted a rule that provides exemptions from registration for certain foreign broker-dealers engaged in certain activities involving U.S. investors and markets. One exemption permits foreign broker-dealers to solicit U.S. institutional investors, but requires, among other things, that any resulting trades be executed through a U.S. registered broker-dealer. The rule provides another exemption for foreign broker-dealers who provide research reports to U.S. institutional investors with assets in excess of $100 million. The research reports cannot, however, recommend the use of the foreign broker-dealer to execute trades and cannot be provided pursuant to any understanding that commission income will be directed to the foreign broker-dealer. Finally, the rule exempts foreign broker-dealers who effect transactions with or for U.S. registered broker-dealers, banks acting in a broker-dealer capacity, certain international organizations, foreign persons temporarily present in the United States, U.S. citizens resident abroad, and foreign branches and agencies of U.S. persons.

SIB

The FSA provides that no person shall carry on, or purport to carry on, investment business in the UK unless he is authorised or exempted from authorisation (FSA, s.3).

For these purposes, "financial intermediary" is used to refer to firms which are "authorised persons", i.e., authorised to carry on investment business in the UK. Applications for authorisation may be made to SIB or the relevant self-regulating organisation (SRO) which in the case of margined transactions, would be The Securities and Futures Authority (SFA).

Pursuant to the FSA, a person carries on investment business in the UK if he carries on investment business from a permanent place of business maintained by him in the UK or if he engages in an activity in the UK which falls within one of several categories identified in Part II of Schedule I to the FSA and are not excluded by Part III and, in respect of that activity, he is not an exempt person.

A financial intermediary is, therefore, subject to regulation in the UK where investment business is carried on from a UK base, wherever the customer is situated. A financial intermediary will also be subject to UK regulation where that financial intermediary, not operating from a UK base, nevertheless carries on business from overseas into the UK (e.g., soliciting UK customer business). Certain exceptions apply in the latter case, e.g., where the overseas person is: transacting with a UK authorised person; responding to an initiative taken by a UK investor or continuing an existing business relationship with him; or promoting his investment services in accordance with the advertising and cold-calling rules, provided that overseas person is not otherwise restricted by the provisions of the FSA.

COB

The Law of the 28th of March 1885 provides that clearing members of financial futures markets can only be brokerage firms (societes de Bourse), credit firms, securities houses or the Caisse des Depots et Consignations. They designate traders (negociateurs) on the futures markets, complying with the general regulation of the CMT. Under specific circumstances, commodities intermediaries can also participate in clearing and trading.

The firms mentioned above, the designated "negociateurs," commodities intermediaries and firms approved by the CMT, complying with skill, fairness and solvency rules, are the only persons authorized to produce orders on the commodities market.

Solicitation or cold-calling is authorized for persons who could apply for clearing membership (see above). This business is defined as the usual activity of advising someone to operate on markets and receiving funds for this operation.

These persons have to comply with the French regulation of solicitation or cold-calling on futures contracts.

Legal provisions on cold-calling protect all clients solicited by French intermediaries whatever their nationality as soon as they are domiciled in France.

Until now, there is no difference between sophisticated and non-sophisticated customers, except that court admits that a sophisticated customer cannot engage responsibility of the intermediary in case of coverage call conditions unfilled.

On the MONEP, brokerage firms (societes de bourse) are qualified directly as clearing members. Credit firms can also be clearing firms. Acting as market-maker can be asked to the SCMC only by brokerage firms or counterparty firms (societes de contrepartie) controlled by brokerage firms.

MOF

Any person who performs securities business (including futures and options) with Japanese investors must either be established or have a branch office in Japan. Any person who is so established or has a branch office must get a license from the Finance Minister in order to perform securities business in Japan.

ASC

If the intermediary is conducting business in Australia, then that intermediary is subject to regulation.

Section 1142 of the CL prohibits a person from dealing in a futures contract on another's behalf or holding himself out as carrying on a futures broking business unless he is licensed or is exempt. Section 1143 contains a similar provision with respect to futures advisers. Dealing is defined in sub-section 25(1) of the CL in terms which would be satisfied by either taking or executing orders.

No distinction is made between solicited versus non-solicited business. Section 9 of the CL defines a "futures broker" as:

- a person who carries on, or 2 or more persons who together carry on, a futures broking business, whether or not the person, or any of the persons, also deals in futures contracts on the person's own account; or

- the holder of a futures brokers licence;

"futures broking business", in relation to a person, means a business of dealing in futures contracts on behalf of other persons.

"Futures adviser", means a person who carries on, or 2 or more persons who together carry on, a future advice business. It is a condition of the grant of a dealers licence and Membership of the SFE and AFFM that a degree of liquidity as specified in the Articles and By-Laws be met.

OSC

Dealers and advisers are required to be registered in Ontario if they trade with or solicit trading or advisory business from Ontario residents or if they are a member of an Ontario exchange. The definition of the term "trade" is very broad and includes entering into contracts as principal or agent, the receipt of an order to effect a transaction and any act, advertisement, conduct or negotiation directly or indirectly in furtherance of a trade. Physical presence is not necessary to trigger a registration requirement although a dealer that the OSC determines requires a registration in Ontario must establish an office in Ontario. Advisers do not need to maintain a physical presence in Ontario but are not allowed to hold customer funds and any discretionary trading must be conducted through dealers registered in Ontario with customer funds remaining in Ontario.

CVMQ

It must be registered with the Quebec Securities Commission.

It must have an office in Quebec.

No dealer/broker may carry on business in Quebec unless he is registered as such with the Quebec Securities Commission.

A securities dealer/broker must have a principal establishment in Quebec, under the direction of a person who is an officer residing in Quebec. To carry on business as an intermediary in respect of options and futures contracts the dealer/broker is subject to the following conditions:

- It has to be registered as a full service dealer/broker with the Commission;

- Any representative authorized to trade in futures markets must have successfully passed the examination on futures markets organized by the Canadian Securities Institute or the National Commodity Futures Examination;

- A person already registered with the Commission as a dealer with an unrestricted practice (full service) wishing to also carry on business as an intermediary in respect of futures contracts must notify the Commission of the names of the representatives authorized to execute such transactions; however, in the case of an exchange recognized as a self-regulatory organization (ME), the notice is given to the exchange rather than the Commission;

- A candidate for registration who wishes to trade futures or options contracts must have successfully complete the courses required by the ME.

SFC

In Hong Kong, a person who conducts a business of trading in commodity futures contracts, or holds himself out as carrying on such a business, must register as a commodity dealer with the Commission.

A person who receives remuneration from carrying on a business of advising any other person or holds himself out as carrying on such a business, or as part of a regular business issues or circulates analyses or reports, or acts as a portfolio manager for a client concerning the purchase or sale of futures contracts, must register as a commodity trading adviser.

SVS

The Superintendency, through its interpretation of Law 18.045, Article No. 24, defines what is meant by "securities intermediary." The requisites for becoming a securities agent or exchange broker are indicated in Articles No. 26, 27, 28 and 29 of the same law. They must be registered in the SVS Registers. Lastly, in order to carry out the above mentioned activities, the agent or broker must be legally constituted within national territory.

FSA

Anybody in Sweden wanting to do business within e.g. banking, securities business, corporate finance or mutual funds - before beginning any business - has to get a certain licence, in case of banking by the government and else by the Financial Supervisory Authority (FSA). When such a licence is received, the business shall be conducted in accordance with the statutes especially issued for each business and under surveillance by the FSA.

NZSC

The legislation is activity based. If the financial intermediary deals in futures contracts the Commission will require it to be a member of an authorised futures exchange and to be authorised by the Securities Commission.

The Act prescribes that a person deals in futures contracts if that person:-

(a) acquires or disposes of the futures contracts on behalf of another person; or

(b) offers to acquire or dispose of the futures contracts on behalf of another person; or

(c) on behalf of another person induces, or attempts to induce, a person, to acquire or dispose of the futures contract; or

(d) advises or assists a person in connection with the acquisition or disposition of the futures contract; or

(e) does any other act or engages in conduct declared by the Commission by notice in the Gazette to constitute dealing in a futures contract for the purposes of Part III of the Securities Amendment Act 1988.