In July, I wrote about a white paper prepared by the states of Delaware, Nevada and Wyoming, Encouraging Business While Fighting Fraud.  The report details state efforts to deal with the use of corporations and limited liability companies to facilitate criminal and terrorist activities.  The report mentions Senator Carl Levin’s efforts to enact federal legislation to require states to collect beneficial ownership information.

Within week’s of the publication of the States’ white paper, Senator Levin introduced legislation, S. 1465, to “require the States to ask incorporation applicants for a list of the beneficial owners of each corporation or LLC formed under their laws, to maintain this information for a period of years after a corporation is terminated, and to provide the information to law enforcement upon receipt of a subpoena or summons”.  Senate Floor Statement on Introduction of the Incorporation Transparency and Law Enforcement Assistance Act (Aug. 1, 2013).   Further, corporations would be required to update changes in beneficial ownership within 60 days.  Securities lawyers will be flummoxed by the definition of “beneficial owner” which is defined in the bill as a “natural person who, directly or indirectly: (i) exercises substantial control over a corporation or limited liability company; or (ii) has a substantial interest in or receives substantial economic benefits from the assets of a corporation or limited liability company.”  However, SEC reporting companies, among others, would be exempt.

This is the fourth attempt by Senator Levin to impose federal beneficial ownership disclosure requirements.  California Senator Diane Feinstein, as well as Senators Chuck Grassley and Tom Harkin, are co-sponsors of the bill.