A:

The law is very fuzzy on the matter of who may own U.S. securities and for what purpose. The U.S. follows the common law system, which is based on precedent. It evolves to reflect changes in precedent-setting and newly passed laws. Recent acts of Congress have changed the laws regarding foreign ownership and holding of U.S.-based assets; as a result, precedents do not necessarily exist for every circumstance that may occur. This lack of precedent means there are too many unknowns to answer this question simply.

First, let's be clear that the Securities and Exchange Commission and the U.S. government encourage foreign investment in the equities and debt markets that fund U.S. capital markets and the U.S. economy - non-U.S./foreign investors simply bring in too much cash to halt this practice! However, there is a lot of room for interpretation regarding who may own what assets and how they may hold them.

Foreign owners and holders of U.S.-based assets are subject to an array of U.S. laws intended to protect U.S. interests. With the passing of the USA Patriot Act of 2001, following the terrorist attacks of Sept 11, 2001, the laws governing foreign ownership of U.S. securities have become even more unclear. The U.S. government has gone to great lengths to ensure that certain organizations that have been linked to terrorist activities, along with their members or suspected members, are not able to finance their operations through American capital markets in any way.

A detailed discussion of this legislation is beyond our scope. However, it's safe to say that if you are not involved in any illegal activities, or any activities that the U.S. government and its organizations may find offensive, you should be well within your rights to own stock in U.S.-based companies.

(To learn more about what it means to own shares in a company, check out our Stock Basics Tutorial.)

RELATED FAQS
  1. How do mutual funds work in India?

    Mutual funds in India work in much the same way as mutual funds in the United States. Like their American counterparts, Indian ... Read Full Answer >>
  2. Do mutual funds have CUSIP numbers?

    The Committee on Uniform Securities Identification Procedures (CUSIP) number is a standardized identification system used ... Read Full Answer >>
  3. What is the difference between a greenfield investment and a regular investment?

    A greenfield investment is a particular type of investment where an international company begins a new operation in a foreign ... Read Full Answer >>
  4. What are the benefits for a company investing in a greenfield investment?

    Advantages of greenfield investments include increased control, the ability to form marketing partnerships and the avoidance ... Read Full Answer >>
  5. Why did China designated certain territories as special administrative regions?

    The primary reason for the People's Republic of China designating two territories as special administrative regions, or SARs, ... Read Full Answer >>
  6. What emerging markets are best positioned to benefit from growth in the utilities ...

    Emerging market economies expected to benefit the most from growth in the utilities sector include China, India, Brazil and ... Read Full Answer >>
Related Articles
  1. Stock Analysis

    6 Risks International Stocks Face in 2016

    Learn about risk factors that can influence your investment in foreign stocks and funds, and what regions are more at-risk than others.
  2. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
  3. Investing News

    Tufts Economists: TPP Will Reduce U.S. GDP

    According to economists at Tufts University, the TPP agreement will destroy half a million jobs in the U.S. by 2025.
  4. Economics

    Governments Ask Tech Giants to Join War on ISIS

    In the US and Israel, governments have asked their respective nations' tech industries to help in the war against ISIS.
  5. Forex Fundamentals

    How To Calculate An Exchange Rate

    An exchange rate is how much it costs to exchange one currency for another.
  6. Economics

    4 Ways China Influences Global Economics

    Learn the four ways China's economy can influence the global economy. The recent decline in Chinese stock markets should be the least of your worries.
  7. Economics

    Three Reasons 2016 Could Be A Better Year for the Global Economy

    The diminishing commodities market and China's slowing growth hurt a lot of companies and economies worldwide. However, there is a chance that much of the shaking out has already occurred.
  8. Fundamental Analysis

    South Korea - King of Exports

    Read about one the most important and successful exporting countries in the world, and learn more about the types of products it exports.
  9. Investing Basics

    Why You Need More International Stocks

    Most investors never stray beyond their borders. That’s a shame.
  10. Fundamental Analysis

    How Globalization Affects Developed Countries

    The increase in communications technology has companies competing in a global market.
RELATED TERMS
  1. Foreign Exchange Reserves

    Foreign exchange reserves are reserve assets held by a central ...
  2. A-Shares

    Shares in mainland China-based companies that trade on Chinese ...
  3. Trade Credit

    An agreement where a customer can purchase goods on account (without ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China ...
  5. Optimal Currency Area

    The geographic area in which a single currency would create the ...
  6. European Sovereign Debt Crisis

    A period of time in which several European countries faced the ...
Hot Definitions
  1. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  2. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  3. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  4. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  5. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  6. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
Trading Center