Foreign Investment

Clearinghouse

handles the clearance and settlement of securities transactions

Bonds

represent an obligation to pay money

Stocks

represent an ownership interest in a business

Exempt securities

some securities transactions are exempt from the requirement of preparing and registering a prospectus. they are issued by governments, banks and and non-profit firms

Purpose of takeover regulations

Barriers set up by owners of publicly traded companies to make it difficult for outsiders to take over their firms

Takeover barriers

- Restrictions on share transferability - Cross-owner ship of shares - Restrictions on voting rights of publicly held shares

Rights of Minority shareholders and Creditors

- appraisal right - right to guaranteed dividends - right to initiate a legal action against certain decision imposed on a subsidiary by a controlling parent company

Memorandums of Understanding (MOUs)

- bilateral agreements of US with several countries - Each MOU establish a procedure that allow the regulatory officials of both countries to exchange information about insider trading

tippee

A person who acts on his/her persona account on information received from a tipper, knowing that information is not available to the public

tipper

A person who has access to material nonpublic information about a company or securities market and who discloses it to a tippee

Operational Reviews

An operating foreign-owned enterprise is usually subject to periodic host state monitoring. Typically, this means that the enterprise must submit regular reports on various aspects of its business activities, and that the host state will conduct regular inspections of the its plant, facilities, and records to insure that the enterprise is in compliance with the local investment regulations or a specific investment agreement

Penalties for Noncompliance. When

Foreign investors violate host state's laws or fail to comply with their investment agreement

Start Up Standards

Host states commonly establish time limits in which an approved foreign investor must begin construction and/or start the operation of a project. Typical time periods range from 6 months to 3 years.

Modification of Investment Agreements

Investment laws usually provide that any modification to an investment agreement has to be approved by the host state, and that the host state has to act in good faith when it makes requests for modification.

Insider trader

Is someone who takes advantages of material nonpublic information about a corporation or the securities market to buy or sell securities for his personal benefitt

Williams Act

Law enacted by the United States in the 1968 that authorizes the Securities and Exchange Commission to issue rules regulating takeover bids

Protection of Subsidiaries

Multinational enterprises are commonly subject to a variety of special regulations designed to keep them from abusing either their local subsidiaries, their subsidiaries' employees, or their subsidiaries' creditors

Penalties for Noncompliance

Ranging from fines to suspension or to the revocation of the facilities they were granted.

City Code on Takeovers and Mergers

Rules of the London Stock Exchange issued by the Exchange's Panel on Takeovers and Mergers that regulate takeover bids

The Convention on insider trading

The convention sets up mechanism to help the regulatory agencies of its signatory states exchange information so they can better supervise their securities market

prospectus

a written statement setting out all material facts relating to the securities and the issuer

Requirement for the protection of Subsidiaries

affiliated companies have to file consolidated financial statements and that parent companies maintain financial responsibility for their subsidiaries.

Export processing zones

are area in which manufacturing facilities can process foreign goods and materials for export without paying tariffs or duties

free retail zones

are areas at international airports or harbors where travelers can buy goods free of local sales and excise taxes

Securities

are instruments that evidence an investment contract, and they are commonly of two kinds: bonds and stocks

bonded warehouses

are places in ports of entry where shippers can store goods until they clear customs

Foreign Investment Guarantees

commitments to compensate a foreign owner in the event its enterprise is nationalized; assurances that capital, profits, dividends, interest, and other forms of current income can be repatriated; guarantees of nondiscriminatory treatment; and promises that taxes and other regulations will not be significantly changed for certain periods of time.

American Depository Receipts (ADR)

is a receipt issued by a bank represents the shares of a company that are on deposit with the bank

Securities Exchanges

places where securities issuers can find investors and investors can exchange their stocks and bonds