A foreign issuer conducts a $500 million high-yield bond offering using a Rule 144A/Regulation S structure. The bonds are initially placed with QIBs in the U.S. and offshore investors under Regulation S. After 40 days, an offshore investor wants to sell their bonds to a U.S. investor who is not a QIB. Is this permitted?

Why D — No, the bonds remain restricted securities and can only be resold to QIBs in the U.S. under Rule 144A or must be registered

Securities sold under Regulation S to offshore investors remain restricted securities when brought back into the U.S. market. While the 40-day distribution compliance period restricts offers and sales to U.S. persons, the expiration of that period does not make the securities freely tradable in the U.S. Resales to U.S. persons must still comply with an exemption from registration, such as Rule 144A (which requires the buyer to be a QIB) or another available exemption. For equity securities of U.S. domestic issuers, the Regulation S distribution compliance period is actually one year.