In general, US banking laws and regulations, including licensure requirements, apply if a foreign firm has a presence in the United States where it conducts banking business, or solicits or conducts banking business through employees or agents based in the United States, through employees or agents based outside the United States, but who periodically travel to the United States to meet with customers, or otherwise through the use of US jurisdictional means (e.g., the US mail or US telephone lines). Generally, US federal laws do not prohibit a foreign bank from servicing deposit accounts of US persons outside of the US, nor do they require a bank to obtain a US federal banking license or other approval or consent. However, lending activity, specifically mortgage lending, is generally regulated by state law and will need to be addressed on a state-by-state basis.
Generally, like US persons, any non-US person engaging in the business of a broker or dealer with or for US persons and/or US securities may be subject to registration as a broker or dealer with the SEC, unless an exemption applies. The SEC takes an expansive view of its ability to enforce US securities laws whenever US jurisdictional means are used to solicit transactions with US "persons," and the concept of US "persons" is also quite broadly defined by statute. While exemptions may be available to non-US persons engaging in broker or dealer activity, such exemptions require adherence to the applicable conditions and may require intermediation by a US registered broker-dealer. Even if exempt, a non-US person remains subject to securities antifraud laws for conduct within the US and/or conduct outside the US that has a substantial effect within the US.
Investment advisers generally must register with the SEC, but there are limited exemptions for foreign investment advisers with no place of business in the US who advise a de minimis number of US persons, with less than USD 25 million under management. In addition, foreign advisers who only advise private funds are also exempt under certain circumstances.
Registration will be required if solicitation, management or advice with respect to futures contracts (and options thereon) occurs in the United States. In particular, registration will be required if a person solicits orders, advises US residents or manages any investments from the United States, absent an exemption.
The Dodd-Frank Act extended US swaps regulation to cross-border activities when such activities have a “direct and significant connection with activities in, or effect on, the commerce of the United States” or when they contravene CFTC rules or regulations aimed at preventing evasion of Title VII.
The application of CFTC swaps rules extraterritorially is governed by a CFTC policy statement (the Interpretive Guidance and Policy Statement Regarding Compliance with Certain Swap Regulations ("Guidance")) and Rule 23.23, known as the "Cross-Border Rule" ("Rule").
The extraterritorial application of most CFTC rules (other than margining and segregation of margin) depends, in large part, on whether one of the counterparties to the transaction is a “US person,” as defined in the Guidance. The Guidance defines “US person” broadly to include, but not be limited to the following:
The Guidance makes clear that the prongs of the "US person" definition are not exhaustive and that there may be circumstances not fully addressed by those prongs and situations where the Guidance does not “appropriately resolve whether a person should be included in the interpretation of the term ‘US person.'”
The Rule creates a new concept of "significant risk subsidiary" that replaces the "conduit affiliate" category for some types of regulations, provides some additional guidance regarding permissible uses of guarantees, and streamlines some of the categories of US person.
With respect to margining and segregation of margin for uncleared swaps, the CFTC adopted a slightly different definition of “US person.” Accordingly, to the extent that a person engages in swaps transactions, careful analysis of both US person definitions should be conducted to determine the applicable substantive provisions of the swaps regulatory regime.
The SEC has also adopted a "security-based swap" regime for swaps that are deemed to be securities. The SEC swaps regime is similar, though not identical, to the CFTC swaps regime, and a separate analysis of US securities-based swaps activity is necessary.
State laws in the United States applicable to insurance business will likely be invoked to the extent a foreign company’s conduct involves US persons or entities located within that state.
State laws in the United States applicable to money transmission and other money services business will likely be invoked to the extent a foreign company’s conduct involves US persons or entities located within that state. In addition, the federal definition of money transmission may also require registration with FinCEN. Note also that a requirement to license with a state as a money transmitter also requires registration with FinCEN even if the business would otherwise be exempt from FinCEN registration.