As the US Department of Commerce seeks certain financial services data from an expanded list of US financial services providers, most US fund managers, investment advisers, private funds, and registered investment companies will be required to file a BE-180 with the US Department of Commerce by October 30, 2020.
The 2019 Benchmark Survey of Financial Services Transactions between US Financial Services Providers and Foreign Persons, Form BE-180, is a survey that is conducted every five years by the US Department of Commerce to gather data about transactions between US financial services providers[1] (US Financial Services Providers) and foreign persons.[2] The BE-180 survey was introduced by the Bureau of Economic Analysis (BEA) in 2009 and conducted again for fiscal year 2014. Notably, the 2014 survey only required BE-180 filings from US Financial Service Providers that met a $3 million reporting threshold and other providers that received a request from the BEA.
In contrast, for the 2019 survey, all US Financial Services Providers are required to submit a Form BE-180 by October 30, 2020,[3] if they engaged in any covered transactions with foreign persons during the 2019 fiscal year that exceeded $500 in the aggregate (regardless of whether they were contacted by the BEA).[4] We expect this will greatly expand the number of US Financial Services Providers with BE-180 reporting obligations. We have been advised by the BEA that the new BE-180 survey reporting requirements were intentionally drafted broadly as the BEA wishes to receive financial services data from a much larger number of US Financial Services Providers.
With the reporting threshold change and because the term “financial services providers” is quite broad, many new entities will be required to report. As set forth in the instructions to Form BE-180, investment advisers, managers, general partners of funds, funds, trusts, and other financial vehicles (including, but not limited to, mutual funds, pension funds, agency accounts and real estate investments trusts (REITS)) are considered to be financial services providers.
In addition, the instructions provide that companies in the securities, commodity contracts, and other financial investments industries (including security and commodity futures brokers, dealers, exchanges, traders, underwriters, investment bankers, and providers of securities custody services) are considered to be financial services providers. Note that the Form BE-180 should be filed on a consolidated basis. A US Financial Services Provider should file a single Form BE-180 covering combined (total) financial services transactions of all its domestic subsidiaries that are financial services providers (which includes, among others, any investment vehicle over which the US Financial Service Provider has voting control[5]).
A US Financial Services Provider must complete pages 1–7 of the BE-180 filing if, during its 2019 fiscal year, it engaged in any sales or purchases of covered financial services with foreign persons that exceeded $500.00 in the aggregate. The US Financial Services Provider must provide additional information in Schedules A–D of Form BE-180 if, during the 2019 fiscal year, its (1) combined purchases of covered financial services exceeded $3 million; or (2) combined sales of covered financial services exceeded $3 million.[6] Covered “financial services” include the following:
A US private fund manager may have a BE-180 filing requirement due to a number of arrangements with foreign persons. For example, if a US private fund manager was paid management fees by a non-US fund or separate account for financial advisory or management services, it will have a reporting obligation. Similarly, if a US general partner of a non-US fund received a performance allocation or carried interest from the non-US fund, it will have a reporting obligation. A US private fund that pays management fees and/or makes incentive allocations to a non-US investment manager or general partner (as applicable) will also have a BE-180 filing requirement. Similarly, payments by a US private fund for brokerage services received from a foreign broker-dealer and payments by a US private fund manager to a foreign subadviser or placement agent will also trigger a BE-180 reporting obligation.
Importantly, these examples are not the only BE-180 reporting triggers for private fund managers and private funds. Accordingly, private fund managers and private funds must consider the sale or purchase of all of the financial services listed in the section above.
A US registered investment company and/or its US investment adviser may also have a BE-180 filing requirement due to its arrangements with foreign persons. For example, a US registered investment company that has a foreign investment adviser will likely have a reporting requirement due to the management fees it pays to the foreign investment adviser. A US registered investment company and/or US investment adviser will also need to consider payments made to foreign subadvisers, foreign broker-dealers, or other foreign financial service providers as these will also trigger a reporting requirement on Form BE-180. US registered investment companies and investment advisers should review the financial services listed in the section above and carefully consider whether they have purchased or sold any of those services to or from foreign persons.
The deadline for filing the Form BE-180 using the BEA’s eFile system is on October 30, 2020. The BEA has advised that it is granting requests for extensions to file from November 30, 2020 through December 31, 2020. In order to request an extension, a written request should be sent via email to BE-180extension@bea.gov.
The BE-180 and instructions for its completion are available on the BEA website.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Boston
Richard A. Goldman
Paul B. Raymond
Miami
Ethan W. Johnson
Joy Crutcher Harrison
Philadelphia
Sean Graber
John J. O’Brien
Washington, DC
Laura E. Flores
[1] “Financial Service Providers”: The definition of financial services provider used in the BE-180 survey is identical to the definition used in the North American Industry Classification System, United States, 2012, Sector 52—Finance and Insurance, and includes holding companies that own or influence, and are principally engaged in making management decisions, for these firms (part of Sector 55—Management of Companies and Enterprises). For example, companies and/or subsidiaries and other separable parts of companies in the following industries are regarded as financial services providers: depository credit intermediation and related activities (including commercial banking, savings institutions, credit unions, and other depository credit intermediation); non-depository credit intermediation (including credit card issuing, sales financing, and other non-depository credit intermediation); activities related to credit intermediation (including mortgage and nonmortgage loan brokers, financial transactions processing, reserve, and clearinghouse activities, and other activities related to credit intermediation); securities and commodity contracts intermediation and brokerage (including investment banking and securities dealing, securities brokerage, commodity contracts and dealing, and commodity contracts brokerage); securities and commodity exchanges; other financial investment activities (including miscellaneous intermediation, portfolio management, investment advice, and all other financial investment activities); insurance carriers; insurance agencies, brokerages, and other insurance-related activities; insurance and employee benefit funds (including pension funds, health and welfare funds, and other insurance funds); other investment pools and funds (including open-end investment funds, trusts, estates, and agency accounts, real estate investment trusts, and other financial vehicles); and holding companies that own, or influence the management decisions of, firms principally engaged in the aforementioned activities.
[2] “Foreign person” means any person resident outside the United States or subject to the jurisdiction of a country other than the United States.
[3] This is the deadline for electronic filings with the BEA. The paper filing deadline was September 30, 2020. The BEA has indicated that it will provide extensions upon written request.
[4] If the US Financial Service Provider’s sale or purchase of covered financial services was less than $501.00 in the 2019 fiscal year it will not have to file a Form BE-180.
[5] A general partner of a limited partnership and the manager or managing member of a limited liability company are each generally deemed to have “voting control.”
[6] Sales and purchases are not combined for purposes of calculating the $3 million threshold.