Under Rule 903 additional restrictions are calibrated to the level of risk that the Regulation S securities will flow back into the United States.
Rule 903 sets forth three categories of transactions.
Transactions by Category Category 1 transactions include offerings of securities by foreign issuers or, in the case of non-convertible debt securities, a U.S. issuer, in an “overseas directed offering.” There is no Category 1 distribution compliance period during which time the securities may not be resold.
Category 2 transactions include offerings of equity securities of a reporting foreign issuer; debt securities of a reporting U.S. or foreign issuer; and debt securities of a non-reporting foreign issuer. The Category 2 safe harbor is available even if there is a substantial U.S. market interest in the securities. Exempt category 2 debt securities include non-participating preferred stock and asset-backed securities.
Category 3 applies to all transactions not eligible for the Category 1 or Category 2 safe harbors. Category 3 transactions include debt or equity offerings by non-reporting U.S. issuers; equity offerings by U.S. reporting issuers; and equity offerings by non-reporting foreign issuers for which there is a substantial U.S. market interest.
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