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9 Int'l Fin. L. Rev. 28 (1990)
Doing Business in the USSR: Welcome to the New Antipodes

handle is hein.journals/intfinr9 and id is 620 raw text is: 28 the multijurisdictional disclosure system now under consideration. The SEC and Canadian securities regulatory authorities have proposed a multijurisdic- tional disclosure system to streamline the offer and sale of securities within the United States by certain Canadian issuers (See IFL Rev September 1989 p19 and December 1990, p40). Schedule for adoption. The SEC has requested that any public comments on the proposed amendments to Rule 6c-9 be delivered to it before the end of November 1990, and accordingly final adoption of these amendments is not expected to occur prior to the first quarter of 1991. The interpretive release The Interpretive Release resolves any remaining question as to whether or not the US branch or agency of a non-US bank, for the limited purpose of issuing securities in the United States, constitutes an investment company under the 1940 Act. This question has been particularly relevant in the context of issuances of securities by such branches and agencies, such as deposit notes and other debt obligations. In the Interpretive Release, the SEC confirms that a US branch or agency of a non-US bank will be deemed to be a 'bank' within the meaning of Section 2(a) (5) (C) of the 1940 Act, provided that certain conditions are satisfied. As set forth in Release No 33-6661 (September 23, 1986), an exemption from the registration require- ments of the 1933 Act is available to US branches and agencies of non-US banks in connection with an offering of securities. Section 3(a) (2) of the 1933 Act exempts 'any securities issued or guaranteed by any bank' from the application of the registration provisions of the 1933 Act. In Release No 33-6661, the SEC stated that, for purposes of Section 3(a) (2), a US branch or agency of a non-US bank would be Doing business in the USSR: welcome to the 'New Antipodes' In the first of three articles on the USSR, Steven M Glick*, of Shearman & Sterling, Paris, and Alexei A Klishin of MOST, Moscow review the general legal, economic and political environment for doing business in the USSR On the evening of Friday, September 21, 1990, over 600 US lawyers joined over 1,000 Soviet lawyers on the occasion of the closing of the Moscow Conference on Law and Economic Cooperation, the largest and most prestigious gathering ever between US and Soviet lawyers. The closing festivities were held in the Banquet Hall in the Kremlin's Palace of Congresses. After a short speech by President Gorbachev, an unexpected guest, reaffirming his commitment to transforming the Soviet economy from a command to a market one, and instituting the rule of law, music and, for the first time in the Palace of Congresses, dancing began. To paraphrase Albert J Pucciarelli, the General Counsel of Inter-Continental Hotels, we had discovered the Antipodes - not the truly exotic lands down-under referred to in 16th century maps, where everything seemed to have been turned upside down, standing on its head - but the New Antipodes, the USSR, a place where business assumptions and negotiations have been turned upside down and you have to stand on your head sometimes in order to see things as they really are. Because of perestroika and the direction and pace of economic reform, the Soviet Union has become a far more difficult, but potentially more rewarding, market in which to do business than it was five years ago. One needs to be familiar not only with Soviet laws that directly regulate foreign investment and International Financial Law Review December 1990 considered to be a 'bank' and thus could rely on the Section 3(a) (2) exemption, provided that 'the nature and extent of Federal and/or State regulation and supervision of the particular branch or agency are substantially equivalent to that applicable to domestic banks chartered under Federal or State law in the same jurisdiction'. However, the SEC expressly stated in Release No 33-6661 that its interpretive position did not affect the status of US branches, agencies or subsidiaries of non-US banks under the 1940 Act. The Interpretive Release now provides an exception from the registration requirements of the 1940 Act for US branches and agencies of non-US banks in connection with their issuance of securities and, in so doing, employs an approach similar to that of Release No 33-6661. The Interpretive Release states that such a branch or agency will be considered to be a bank within the meaning of Section 2(a) (5) (C) of the 1940 Act, provided that 'the nature and extent of Federal and/or State regulation and supervision of the particular branch or agency are substantially equiva- lent to those applicable to banks chartered under Federal or State law in the same jurisdiction'. The SEC has charged the branch or agency and its counsel with responsibility for determining whether the require- ment of 'substantially equivalent regulation' is satisfied as well as whether or not the branch or agency is 'doing business'under the laws of any State or of the United States, a substantial portion of the business of which consists of receiving deposits or exercising fiduciary powers ... and which is supervised and examined by State or Federal authority'. If these requirements are met, then the US branch or agency of the non-US bank may rely on the exclusion provided to banks in Section 3(c) (3) of the 1940 Act. Accordingly, US branches and agencies of non-US banks need no longer comply with Rule 6c-9 or otherwise obtain an SEC exemption or other relief in order to ensure compliance with the 1940 Act. E

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