May Processing of restricted U.S. and Canadian Securities

Transcription

1 May 2013 Processing of restricted U.S. and Canadian Securities

2 Table of Contents 1. Terms 3 2. What are restricted securities? U.S. market Canadian market 4 3. Delivery of restricted securities to UBS AG 5 4. Detailed information on U.S. restricted securities Our custodian bank and broker for the U.S. market: Brown Brothers Harriman & Co., New York Request of clarification for lifting of restriction (registered securities) Notification of BBH regarding lifting restrictions Results of clarification of Restriction Rule 144(B) Registration statement 8 5. Processing fees and expenses 10 2

3 1. Terms Affiliate Corporate action Corporate resolution Legal counsel Legal opinion Registration statement Rule 144B SEC Shell Company Member of management of issuing company and / or shareholders who control directly or indirectly more than 10% of the outstanding company's capital Capital transaction (merger, stock dividend, split, spin-off, etc.) Form for listing the authorized signatories of legal entities Company lawyer or free-lance attorney at law Official statement of legality by an attorney at law Sale as a pre-condition for lifting a restriction (The stock remains restricted until sale) Lifting of a restriction as a pre-condition to receive freely tradable stocks Securities and Exchange Commission (U.S. stock exchange supervisory authority) a) A company with no or nominal operations and no or nominal assets b) Assets consisting solely of cash and cash equivalents or other nominal assets. Furthermore, shell companies do not operate businesses and usually do not have employees. Once a shell company becomes a fully operating company and they have filed with the SEC all reports required to be filed during the preceding 12 month and has filed current (Form 10-k or 10-Q) information reflecting that they are no longer a shell company, the restriction on securities may be lifted after one year from when they started filing with the SEC. Stock power T /A (Transfer agent) General remark: According to the actual situation, a proof of a sale is requiredfor the lifting of the restriction. This can cause delays in the processing for which UBS is not liable. The terms and handling of such sell orders is described in this document under section Form for Transfer of power of attorney Share register administrator 3

4 2. What are restricted securities? 2.1 U.S. market In the U.S. market, there is a distinction between freely tradable and restricted securities. Restricted securities are financial instruments (stocks, warrants, bonds) that are subject to a sales restriction because they have not been registered under the Securities Act of Therefore, the designation restricted securities denotes that trading (sale or transfer) of the relevant instruments is limited. The following text is an example of a disclaimer always noted on the front or back side of the securities certificate. These securities have not been registered under the Securities Act of 1933, as amended (the act ), or under applicable state blue sky laws ( blue sky laws ) and may not be sold, pledged or otherwise transferred unless covered by an effective registration statement under the act and any blue sky laws, in compliance with rule 144 under the act and any similar regulations under blue sky laws, or the company has been furnished with an opinion of counsel reasonably acceptable to the company to the effect that no registration is legally required for such transfer under the act or any blue sky laws. U.S. restricted securities can be acquired via the following ways, among others: Public offerings: Original owners sell unregistered securities (not registered under the Securities Act of 1933) through an initial public offering (IPO) to raise capital from public investors. Direct purchase: a purchase of unregistered securities from an original owner in a private sale. If not an affiliate, the purchaser can assume the ownership holding period of the original owner. Direct purchase / private placement: a purchase directly at the company Mergers and acquisitions: if the securities are not registered with the SEC. Spin-offs Employee stock and option plans Important: Please note that following two lifting procedures exist for US-Restricted Securities. a) Rule 144B: Lifting of a restriction as a pre-condition to receive freely tradable stocks (detailed description in section 4.4.1) b) Registration statement: Sale as a pre-condition for lifting a restriction (detailed description in section 4.4.2) 2.2 Canadian market Preliminary note: Canadian restricted securities might be subject to: a) Canadian restrictions only b) Canadian restrictions and U.S. restrictions c) U.S. restrictions only In cases b) and c), the procedures for lifting a U.S. restriction on restricted securities in the U.S. market (according to section 4.) apply analogously to the lifting of the U.S. restriction in Canada. The Canadian restriction in case b) will only be lifted upon lifting of the U.S. restriction. 4

5 For the lifting of the Canadian restriction in case b) and for the lifting of the restriction in case a), please note the following: For restricted securities in the Canadian market, a holding period can be noted on the securities certificate. The following text is an example of a disclaimer always noted on the front or back side of the certificate: Unless permitted under securities legislation, the holder of the security must not trade the security before June 16, Without prior written approval of the exchange and compliance with all applicable securities legislation, the securities represented by this certificate may not be sold, transferred, hypothecated or other-wise traded on or through the facilities of the TSX Venture Exchange or otherwise in Canada or to or for the benefit of a Canadian resident until June 16, Canadian restricted securities can be acquired via the following ways, among others: Public offerings: Original owners sell unregistered securities (not registered under the Securities Act of 1933) through an initial public offering (IPO) to raise capital from public investors. Direct purchase: a purchase of unregistered securities from an original owner in a private sale. If not an affiliate, the purchaser can assume the ownership holding period of the original owner. Direct purchase / private placement: a purchase directly at the company Mergers and acquisitions: if the securities are not registered with the SEC. Spin-offs Employee stock and option plans Given such a restriction, UBS will automatically initiate lifting of the restriction as long as the company is a public one. A time horizon of up to 10 working days and more should be expected until receipt of the freely tradable position since processing / exchanging the certificate is carried out on a manual basis. This timeline shall not be binding for UBS because the processing of such lifting is not in UBS sphere of influence. In view of the simple process for securities with solely a Canadian restriction, we provide only basic instructions regarding the lifting of these restrictions. 3. Delivery of restricted securities to UBS AG The delivery of restricted securities can be carried out in various ways, e.g.: Physical delivery at the counter of the branch / handover by the client to the client advisor Delivery through another bank Incoming security through a corporate action Please note that by missing detailed information and documentation / endorsement paperwork will inevitably lead to delays (processing / clarification / sale, etc.). Required Transfer Documents The custodian in the U.S. may not accept positions for further deposit due to local legislation at anytime. In this case such a position is returned accordingly. 5

6 4. Detailed information on U.S. restricted securities 4.1 Our custodian bank and broker for the U.S. market: Brown Brothers Harriman & Co., New York The restricted securities are held in safekeeping in physical form in the vault of our custodian bank, Brown Brothers Harriman & Co., New York (hereinafter «BBH»). With BBH, we have a specialist with a proven track record at our disposal. BBH s role as custodian and broker can be summarised as follows: Handling / clarifying of our enquiries in connection with lifting of restrictions Conducting research activities for lifting of restrictions with T /A, company, legal counsel Submitting the required documentation to the SEC punctually Obtaining the legal opinion if needed Executing the sell orders Exchanging the relevant restricted position for clean, DTC-eligible securities After booking the restricted securities at BBH, a confirmation will be sent to you. In respect of the above, please note the following: UBS undertakes no proactive measures, i.e. the client must explicitly instruct UBS at the relevant time with regard to carrying out lifting of the restriction or sale. Until such time that the restriction is lifted, the security remains blocked. The following section provides detailed information regarding lifting of restrictions and sale of securities. 4.2 Request of clarification for lifting of restriction (registered securities) Registered securities, registered shares in particular, generally bear the name of the holder, so the shareholder is entered in the relevant company s share register and receives the pertinent information directly from that company (e.g. sales possibilities by means of a registration statement see section 4.4.2).Therefore, the shareholder has access to more detailed information about the company and / or shareholding in the company than UBS. To start a request for clarification of the lifting of restriction and to assist a smooth process, UBS always requires a written instruction on behalf of the shareholder or client containing the following information: Mandatory information for lifting the restriction: description of security (restricted share / unit) CH security number or ISIN Number of shares / units Custody account number of client Name of the Shareholder / Beneficial Owner Information to be provided if possible (see also section 2.1): Date of acquisition or payment (including corporate action transactions, if possible) Means of acquisition (e.g. private placement, conversion of warrants, etc)? Counterparty of acquisition (company, broker, etc.)? Furthermore, data relating to contact persons at the T /A, company or legal counsel (e.g. first and last name, address, telephone number, address) who could confirm the possibility of a restriction lifting would be useful in accelerating the clarification process. 6

7 4.3 Notification of BBH regarding lifting restrictions Once the formalities have been determined, and if the possibility already exists for lifting the restriction, the requisite form must first be submitted to BBH. In this process, the shareholder is required to complete and sign the documents as provided by BBH via UBS and to return the completed and duly signed documents to UBS within 20 business days. Upon receipt of said documents in due time, and if required upon availability of the legal opinion from legal counsel, BBH will check the documents and send the restricted certificate(s) in physical form, together with accompanying documents, to the transfer agent, for the purpose of exchanging with clean, tradable securities. Following the exchange, these clean securities are returned to BBH in physical form as well. Clients do not have free access to the securities until the clean securities arrive at BBH. Time frame: After submitting the required documents to BBH, the processing time can be up to four weeks and more, depending on the company / legal counsel / transfer agent, until the clean-securities is confirmed by BBH. 4.4 Results of clarification of Restriction Please be reminded that there are two different types of lifting restrictions. a) If you get the information that the restriction can be lifted under Rule 144B, please follow section b) If you get the information that the restriction can be lifted under Registration Statement, please follow section Rule 144(B) Please note: If UBS has not received the complete and duly signed documents within due time, UBS is authorized to close the dossier and deduct the incurred expenses (see section 5 / Processing fees and expenses). In case and at the time UBS receives the complete and duly signed documents after the given time limit, it may, at its own discretion, initialise a new clarification process with BBH with regard to the possibility of lifting the restriction, subject to fees at the expense of the client (see section 5) Lifting of the restriction under Rule 144(B) Requirement No direct business dealings on the part of the shareholder and associated third parties with the company (affiliate) within the previous 90 days No investment on the part of the shareholder and associated third parties exceeding 10% of the company's outstanding shares Company must have current -status with their filings at SEC and has to publish this on the official communication channel of the company (if not a former Shell Company ) Rule 144(B): > 1 year after acquisition Rule 144(B): 6 12 months after acquisition Company must not be a shell company Clarification by BBH, subject to fees (see section 4.1) Form 144(B) Representation Letter must be completed and signed by the shareholder _ R 144(B) Rep Letter 7

8 Following confirmation of the freely available position by UBS, the security can be sold, during an unlimited period, via the Investment Bank (stock-exchange order), or held in a custody account without restriction-related holding period, as desired. Former Shell Company For positions of former shell companies the restriction can usually only be lifted by selling it (mandatory via our team OETK). In such a case you will be informed at the time of communicating the result of the clarifica-tion. Such position will remain blocked in the client s custody account until the sale has been processed. The procedure of a sale is described in section / requirements Rule 144 / Form 144 / ONLY FOR AFFILIATES OF THE COMPANY Lifting of the restriction is normally possible six months after acquisition of the security. Attention! This applies only for immediate sale of the securities within 90 days from the time of SEC filing; thereafter the securities registered at the SEC filing but not sold are restricted again. Requirements The company must have current status with regard to its relevant filing with the SEC and publication on the company s official communication channels required Volume limitations (1% volume limitations on the outstanding number of shares via the OTCBB exchange or average for NYSE / AMEX stocks) It is the shareholders responsibility to arrange a» Selling Window if required. 144 Package (comprises form 144, 144 rep letter & 1% formula) must be fully completed and signed by the shareholder for each SEC filing. The 1% formula is always sent to UBS separately through BBH. SEC filing (is carried out by BBH, upon receipt of the aforementioned documents) Legal opinion (issued by a legal counsel at the request of BBH, after SEC filing has taken place) After 90 days, any unsold securities become restricted again and a new clarification is required to verify if the shares can still be sold for an additional 90 days (SEC re-filing). Form 144 R 144 Rep Letter by affiliate Note: A company may lose its «current» status with the SEC during the above-mentioned 90-day period. Neither BBH nor UBS are notified of such loss of status by the company. We strongly advise refraining from selling restricted securities if a company becomes «incurrent». Only the company knows if its «current» status can be re-instated. Hence, such sales of U.S. restricted securities under rule 144 / Form 144 are processed at the full and exclusive risk of the client. Submitting stock-exchange sell orders: It is mandatory to submit sell orders to UBS Wealth Management & Swiss Bank (Global Custodian) by (CET). Please note that sell orders for restricted shares must not be submitted directly to UBS Investment Bank. UBS will notify you upon placement of the sell order. Executions will be confirmed to you separately. Upon complete lifting of restriction and subsequent settlement of transaction by BBH the contract note will be sent to the Client. The brokerage fee will be charged with the settlement through UBS Investment Bank. The responsibility for any foreign-exchange disposals rests with the Client. For partial sales, UBS additionally requires blank stock powers (only with security description, signature and printed name filled in). In order to ensure a swift settlement process, the Client is advised to provide UBS with such original documents when the first partial sell order is placed Registration statement The relevant company normally notifies the registered shareholders directly that they have the possibility to sell the number of shares listed on the respective registration statement. We strongly advise allowing us to clarify the validity of the registration statement in advance through a clarification process, subject to fees (see section 4.2). 8

9 Requirements In order to ensure that a sale is covered under a registration statement, the following requirements must be fulfilled: 1. The registration statement must be declared effective by the US Securities and Exchange Commission (SEC). 2. In addition, the relevant company must have current status with regard to its reporting requirements to the SEC, meaning that the company must not be late in fulfilling obligations to submit such reports to the SEC (e.g. 10Q, 10K, etc.). This information must also be published on the official communication channels of the company. Note: A registration statement can be nullified by the SEC at any time. The company is free as to whether or through which channel it chooses to notify the shareholder about such nullification. Consequently, all sales of U.S. restricted securities under a registration statement are processed at the full and exclusive risk of the Client. Submitting stock-exchange sell orders: It is mandatory to submit sell orders to UBS Wealth Management & Swiss Bank (Global Custodian) by (CET). Please note that sell orders for restricted shares must not be submitted directly to UBS Investment Bank. UBS will notify you upon placement of the sell order. Executions will be confirmed to you separately. Upon complete lifting of restriction and subsequent settlement of transaction by BBH the contract note will be sent to the client. The brokerage fee will be charged with the settlement through UBS Investment Bank. The responsibility for any foreign-exchange disposals rests with the Client. For partial sales, UBS additionally requires blank stock powers (only with security description, signature and printed name filled in). In order to ensure a swift settlement process, the Client is advised to provide UBS with such original documents together with the Client s sell order. If the securities subject to clarification are not sold within at most 20 business days after the Client s receipt of BBH s notification (regarding the effectiveness of the Registration Statement) by UBS, UBS is authorized to close the dossier and deduct the incurred expenses (see section 5 / Processing fees and expenses). 9

10 5. Processing fees and expenses U.S. securities Basic fee, for clarification without subsequent lifting of restriction USD 800 Basic fee, for clarification and lifting of restriction within 30 days after notification of conditions to the client USD 1000 Additional fees / expenses (e.g. lawyer fees, etc.) as specified Additional third-party fees / expenses (e.g. stock transfer fee, shipping expenses) generally up to USD 200 Additional in-house expenses (for extraordinary expenses only) dependent on cost Canadian securities, with US restriction Same as fees for U.S. securities Canadian securities, with Canadian restriction only Basic fee for lifting restriction CHF 250 (Date of the holding-period restriction is always noted on the securities certificate) The following services are included in the basic fees: Advisory services, addressing and / or forwarding enquiries Clarification of type and duration of restriction with legal counsel, company or transfer agent and the legal provisions relating to lifting of restrictions and sale of securities Clarifying, obtaining and sending the requisite documents as well as controlling and forwarding the relevant documents completed and signed by the shareholder to the custodian bank Carrying out re-registrations and securities exchange Correspondence and dossier maintenance The information contained in this document has been prepared based on publicly available information or information obtained from sources believed to be reliable. It is not a complete statement of summary of the financial market in question. All information contained in this document is subject to change without notice. UBS offers no warranty any accepts no liability that the information provided is correct, complete and up to date. The information herein is not intended and shall not be interpreted as legal advice. Nothing in this document should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction. UBS All rights reserved. 10