Structuring a Cross-Border Securities Offering: Key U.S. Exemptions from Registration

Because of the depth and liquidity of the U.S. capital markets, American investors often represent a valuable supplementary investor base for both public and private Canadian offerings and foreign offerings in general. Yet for many Canadian issuers and their advisors, understanding the U.S. securities exemptions for foreign issuers can appear complex and intimidating.

When a Canadian issuer seeks to raise capital from U.S. investors, it generally faces two primary paths:

1. Registering the offering with the SEC, which immediately subjects the issuer to the extensive and ongoing reporting obligations under the U.S. Securities Exchange Act of 1934; or
2. Relying on an established exemption from SEC registration to conduct a targeted private placement.

If the latter approach is preferred, understanding the main exemptions under the U.S. Securities Act of 1933 (the “Securities Act”) is essential. The following overview summarizes several of the most common exemptions used in cross-border offerings.

Regulation S: Offshore Transactions

A securities offering made outside the United States can qualify for an exemption from U.S. registration under Regulation S, provided two key conditions are met:

1. The offer or sale must occur in an offshore transaction; and
2. There must be no directed selling efforts within the United States.

For instance, securities sold on a foreign exchange such as the TSX or TSX Venture Exchange or the Canadian Securities Exchange (CSE) to non-U.S. purchasers are typically treated as offshore transactions under Regulation S. This exemption is commonly used for the Canadian or international tranche of a cross-border offering.

Private Placements under Section 4(a)(2)

Section 4(a)(2) of the Securities Act provides an exemption for private offerings made to a limited number of sophisticated investors who purchase securities for investment purposes and without any general solicitation or public advertising.

Securities sold under this exemption are considered “restricted securities”, meaning they cannot be freely resold unless registered or unless another exemption applies.

Regulation D: Safe Harbor for Private Offerings

Because the boundaries of Section 4(a)(2) can be uncertain, the SEC created Regulation D, which provides a “safe harbor” for private placements that meet its specific requirements.

Under Rule 506 of Regulation D, issuers may sell securities exclusively to accredited investors (AIs)—a category that includes certain institutions and high-net-worth individuals deemed to possess sufficient financial sophistication.

If general solicitation or advertising is used, the issuer must take additional steps to verify each investor’s accredited status. As with Section 4(a)(2), securities issued under Regulation D are restricted from resale.

Rule 144A: Resales to Institutional Buyers

Rule 144A facilitates the resale of restricted securities to Qualified Institutional Buyers (QIBs)—entities such as insurance companies, investment funds, broker-dealers, and banks that own and invest at least USD 100 million in unaffiliated securities.

This exemption is frequently used in underwritten private placements, where the issuer sells securities to an initial syndicate of investment banks (the “initial purchasers”), who then resell the restricted securities to QIBs.

Additional Compliance Considerations

Issuers relying on these exemptions must also comply with applicable state securities laws, commonly known as “blue sky” laws, unless preempted by federal law.

Finally, regardless of the exemption used, issuers must always adhere to the anti-fraud provisions of both federal and state securities statutes, which prohibit material misstatements or omissions in connection with the offer or sale of securities.

Why Choose Soreide Law Group, PLLC for Regulation S Offerings

If you’re planning a cross-border securities offering or seeking to raise capital from non-U.S. investors, compliance with Regulation S is essential. This rule allows issuers to access global investors while remaining exempt from U.S. registration—if properly structured.

At Soreide Law Group, PLLC, we advise U.S. and foreign issuers, private funds, and placement agents on Regulation S offerings and related cross-border transactions. We help clients design compliant offshore offerings, coordinate dual Reg S / Rule 144A structures, and navigate the nuances of international distribution.

Our focus is not only on compliance, but also on helping clients streamline execution, reduce risk, and reach global investors efficiently.

Contact us to learn how our Regulation S expertise can support your next international offering. 1-888-760-6552