The U.S. Bureau of Economic Analysis (BEA), a unit of the U.S. Department of Commerce, recently released its final rule making several changes to the BE–13 Survey of New Foreign Direct Investment in the United States. The rule simplifies reporting requirements for private funds and their advisers for new foreign direct investments. In addition, it amends the reporting requirements for certain private funds on other BEA surveys of foreign direct investment in the United States, including the BE–605, Quarterly Survey of Foreign Direct Investment in the United States; and the BE–15, Annual Survey of Foreign Direct Investment in the United States.

The BE–13 survey collects information on the acquisition or establishment of U.S. business enterprises by foreign investors and information on expansions by existing U.S. affiliates of foreign companies. The BE–13 survey is required to be filed by persons subject to the reporting requirements, whether or not they are contacted by BEA, which includes many private funds and their advisers.

Foreign direct investment in the United States is defined as the ownership or control, directly or indirectly, by one foreign person (foreign parent) of 10 percent or more of the voting securities of a U.S. business enterprise. Under the previous rule, investments by foreign entities, including general partners and managing members of private funds and any other investors with a 10 percent or greater voting interest in a U.S. private fund, were considered “direct” foreign investments reportable in BEA surveys regardless of such investors’ actual indirect ownership in operating portfolio companies held by the private funds.

In the new rule, BEA revised the private fund reporting requirements to indicate that if the foreign parent of a U.S. private fund does not own through the private fund 10 percent or more of an operating company, the private fund is not required to file. Such private funds should instead report through the Treasury International Capital (TIC) reporting system, where other related portfolio investments are already being reported (and which many private funds already complete in addition to BEA’s direct investment survey), and not report on BEA’s direct investment surveys. Thus, the revised regulations will exempt from the BEA reporting requirements those private funds (and their advisers) that acquire less than a 10 percent voting interest in operating companies, which would include both hedge and private equity fund of funds that invest only in other private funds and those private funds that do not otherwise make significant investments in operating companies. Direct investment in operating companies of 10 percent or more, including investment by and through private funds, will continue to be reported to BEA.

BEA also will change the survey form design and accompanying instructions to improve the quality of the data collected and simplify the reporting.

The final rule will be effective November 21, 2016.