General Securities Sales Supervisor (Series10) Practice Exam

Which statement about Regulation S offerings of securities is NOT true?

1. Investors buy Regulation S securities at a discount.

2. Advertising is permitted to non-U.S. residents.

3. Offerings can only be made to accredited investors.

4. Securities must have a legend for U.S. resale restrictions.

The correct answer is: Offerings can only be made to accredited investors.

Regulation S provides a safe harbor for offers and sales of securities outside the United States without the need to register those securities with the SEC, as long as certain conditions are met. While Regulation S does facilitate offers to international investors, it does not restrict offerings solely to accredited investors. This means that non-U.S. investors can include both accredited and non-accredited individuals, which enables a broader range of potential buyers outside the U.S. market. The other statements highlight different aspects of Regulation S. Investors can indeed buy these securities at a discount compared to domestic offerings due to the need to attract non-U.S. capital. Advertising to non-U.S. residents is permissible, as Regulation S recognizes the distinction between domestic and foreign investors. Finally, securities issued under Regulation S must carry a legend that clearly outlines the restrictions related to resale in the U.S. market to ensure compliance with U.S. law. This is necessary for maintaining the safe harbor that Regulation S provides, thus safeguarding the issuer and ensuring that the investors are fully informed of their limitations.