[tinkerrr]

If they are raising money from American individuals (not Qualified Institutional Buyers) they would need to be registered with the SEC irrespective of where they are headquartered.

They might, at most, qualify as foreign private issuer, so they can file with the SEC in private, but I strongly doubt they did it. http://www.sec.gov/info/smallbus/qasbsec.htm

Edit: For those asking why the American laws apply to this situation, it is because if you're raising money in America, American laws apply just like British laws would apply to Google if Google is doing business in Britain (or raising money there). If the company is registered in Scotland and raises money in Scotland, knock yourself out, the SEC doesn't care.

[logfromblammo]

I do not like the implication that the SEC somehow owns potential American investors. At some point, you have to treat me like a big boy, point at the "caveat emptor" sign, and let me be on my way.

Any claims that the SEC is vital to protecting Americans from financial fraud, maintain fair and orderly markets, and facilitate new capital are all quite soundly countered with a variety of phrases, such as "credit default swaps", "AIG", "MERS", "collateralized debt obligations", "naked short", "Bernie Madoff", "matters under inquiry", etc.

[dllthomas]

'Any claims that the SEC is vital to protecting Americans from financial fraud, maintain fair and orderly markets, and facilitate new capital are all quite soundly countered with a variety of phrases, such as "credit default swaps", "AIG", "MERS", "collateralized debt obligations", "naked short", "Bernie Madoff", "matters under inquiry", etc.'

Your reasoning here is fallacious - the question is the current situation compared to the counter-factual without the SEC, not whether the SEC eliminates all malfeasance (whatever the regulatory climate and funding levels).

Of course, it's worth noting that the existence of a fallacious argument doesn't undermine the point it was trying to make; it just fails to support it.

[logfromblammo]

Your question is fundamentally unanswerable. We cannot isolate the operation of the SEC in the market as a variable, any more than we can swim twice in exactly the same river.

With respect to the question, "can the SEC protect Americans from financial fraud?" the answer is no. Fraud occurs frequently, and of greatest recent notoriety and severity are the examples I alluded to. The SEC cannot protect; it can only punish. Just like Chief Wiggum.

As always, in free markets as well as regulated ones, you have to do your own research into your trade partners before deciding to trust them (caveat emptor). The SEC is just part of the institutional stagecraft that keeps the market from becoming paralyzed by mutual suspicion.

And since we cannot have two markets, one for control and one for experimentation, we cannot say with any reasonable certainty whether the malfeasance eliminated by the SEC is of greater or lesser magnitude than the malfeasance enabled by it. But we can say that the latter is most certainly not zero.

[dllthomas]

It's not "fundamentally unanswerable" any more than any other question about a complex system over which we have limited control. It's hard to answer - this is not the same thing. That the question is hard to answer is no reason to substitute irrelevant alternatives. The appropriate thing to do is 1) answer it as best we can, and 2) recognize that there remains substantial uncertainty.

[SoftwareMaven]

The internet blurs the lines, though. If I was in Scotland raising money and Americans came to Scotland to invest, there would be no SEC issues (assuming I wasn't marketing to Americans; of course, this may imply qualified investors anyway). The problem is what it means to "come to Scotland" and to "market to Americans" has changed with the internet. So the question becomes how to differentiate actively courting US investors from local investors, and it's an important question to keep any government (especially the US, unfortunately) from overstepping it's sovereign rights and encroaching on another country's.

[dllthomas]

"(assuming I wasn't marketing to Americans; of course, this may imply qualified investors anyway)"

I can afford to fly to Scotland, and I am nowhere near a qualified investor...

[Scoundreller]

And you may be a "qualified investor" and dumb as rocks. In which case, I have a flashy sales presentation for you!

[dllthomas]

Certainly the case. I wasn't, by any means, supporting investor qualification as sensible.

[dragonwriter]

> it's an important question to keep any government (especially the US, unfortunately) from overstepping it's sovereign rights and encroaching on another country's.

The essential character of "sovereign rights" is that they are unbounded except by voluntary restraint of the sovereign.

[wdewind]

Why would this matter to them if they are based in Scotland?

[gnaritas]

Where they're based is far less relevant than where they do business. If you do business in American with American customers you need to obey American laws.

[kintamanimatt]

So long as they aren't domiciled in the US, American laws don't (or shouldn't) apply outside the US any more than British laws apply in the US.

[AJ007]

The US decided they could prosecute BNC because the transactions, completely legal where BNC was doing business, we're in US dollars. It took a $10 billion fine to finally get France to push back.

[gnopgnip]

US law applies to products being sold to us citizens.

[logfromblammo]

America's allies really need to sit Columbia down and have an intervention. It's been 238 years since she moved out of Britannia's house, and it's just been wild parties and wars of choice ever since. At some point, it really is time to settle down and start respecting the neighbors.

[rayiner]

Your rant is misplaced. Every country in the world would claim jurisdiction over people trying to sell things in their country.