| What is the Corporate Transparency Act? | Under the Corporate Transparency Act (the “CTA”), unless otherwise exempt, all entities created in the United States or registered to do business in the United States by the filing of an organizational document with U.S. state officials will be required to report information about their beneficial owners to the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). | ||||||||||||||||
| Who is a non-U.S. investment adviser? | A non-U.S. investment adviser is an entity that provides investment advisory services to clients and is organized in a jurisdiction outside of the United States. | ||||||||||||||||
| How could the CTA impact non-U.S. investment advisers? | A non-U.S. investment adviser will only be required to report information about the adviser’s beneficial owners if it is registered to do business in one or more states in the United States.
A non-U.S. entity typically needs to register to do business in a U.S. state if it engages in certain activities within that state, such as having a physical presence (e.g., office) in that state, having employees in that state or conducting significant business transactions in that state. Each state has its own rules for what constitutes “doing business.” Non-U.S. investment advisers should also evaluate the other entities in their organization and the entities that they manage (including funds, holding companies, portfolio companies and their subsidiaries) to determine whether those entities need to comply with the CTA’s beneficial owner information (“BOI”) reporting requirements. |
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| When do the reporting requirements take effect? | The date of an entity’s formation or registration in the United States will determine the amount of time such entity will have to file an initial report:
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| Are exemptions available for non-U.S. entities that are otherwise required to report? | There are 23 exemptions from the CTA’s reporting requirements, which are noted on the FinCEN website linked here. However, certain exemptions will be more useful than others to non-U.S. investment advisers, including:
* A PIV that otherwise meets the criteria of Exemption #18 but is formed under the laws of a non-U.S. country and registered to do business in the United States (referred to as a “foreign pooled investment vehicle”) is only required to file a BOI Report for one individual who exercises substantial control over the entity. If more than one individual exercises substantial control over the entity, the entity must report information about the individual who has the greatest authority over the strategic management of the entity.
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| Who is a beneficial owner? | A beneficial owner is an individual who (i) directly or indirectly exercises substantial control over the reporting entity or (ii) owns or controls at least 25% of the entity’s ownership interests. Depending on the circumstances, this may include directors and executive officers of the reporting entity and/or individuals with certain decision-making or veto rights. | ||||||||||||||||
| What beneficial owner information is required to be reported? | Reporting entities are required to provide the following for each beneficial owner:
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| Reporting entities formed on or after January 1, 2024 will also have to provide information on the person(s) who formed the entity and directed the filing of the document that created or registered the entity (referred to as “company applicants”). | |||||||||||||||||
| Who can access the reports?
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FinCEN’s database of beneficial ownership information will not be publicly available. In certain circumstances, information may be disclosed to U.S. federal and state law enforcement agencies and, with the reporting entity’s consent, to financial institutions in connection with know-your-customer (KYC) obligations (among others). | ||||||||||||||||
| What if information changes after a report is filed? | Once the initial report is filed, reporting entities are required to update their report within 30 days any time there is a change to previously reported information about the reporting entity itself or its beneficial owners (such as the reporting entity registering a new business name or any change to a beneficial owner’s name or address). | ||||||||||||||||
| Are there penalties for non-compliance? | The penalties for willfully failing to comply or timely file a report include civil fines of up to $500 per day and criminal penalties of up to $10,000 and/or two years of imprisonment. Moreover, FinCEN has made clear that an enforcement action can be brought against individual beneficial owners and company applicants who willfully fail to provide required information to a reporting entity. | ||||||||||||||||
| What should non-U.S. investment advisers be doing now? |
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[1] A beneficial owner who does not wish to provide his or her personal information to the reporting entity will be able to provide such information directly to FinCEN, which will issue the owner an identification number to provide to the reporting entity.
