The U.S. Department of Commerce, through the Bureau of Economic Analysis (the “BEA”), requires U.S. financial services providers (including investment advisers, funds and their general partners) that had certain financial services transactions with foreign persons in excess of $3 million during their 2014 fiscal year to file a report on Form BE-180 (a “BE-180 Filing”). In late August, the BEA released the new BE-180 form and instructions for the 2014 survey, which is due as early as November 1, 2015 (subject to certain extensions). BE-180 is a 5-year benchmark survey. At the time of the prior survey for 2009, a BE-180 Filing was required only upon request by the BEA. Similar to recent changes impacting other BEA surveys, including the BE-10 and BE-13 surveys, the BEA announced in a rule published in the Federal Register earlier this year that, in addition to those contacted by the BEA, any U.S. person that satisfies the reporting threshold (referred to as a “U.S. Reporter”) will be required to make a BE-180 Filing, regardless of whether the BEA has contacted such person. Accordingly, investment advisers and the funds they advise will now be required to make a BE-180 Filing if they meet the reporting thresholds discussed in further detail below.
A U.S. person (including an individual or an entity) is required to make a BE-180 Filing if the U.S. person is (1) a “Financial Services Provider”, which includes, among others, “investment advisors and managers and funds, trusts, and other financial vehicles (including mutual funds, pension funds, real estate investment trusts, investors, stock quotation services, etc.)”1 and (2) had transactions (either in sales or purchases) directly with “Foreign Persons”2 in all “Financial Services” in excess of $3 million during its 2014 fiscal year.3 In addition, any Financial Services Provider that has received a request for a BE-180 Filing but is below the $3 million threshold for both sales and purchases of Financial Services is required to make a partial BE-180 Filing. The BEA’s definition of “Financial Services” is very broad and includes sales and purchases in the form of fees, commissions, and other charges for financial management services, brokerage services, private placement services, financial advisory and custody services,4 and certain other financial services.5 As a result, the definitions of Financial Services Provider and Financial Services contemplate reporting by investment advisers and funds.
A Financial Services Provider will meet the reporting threshold if it had either aggregate sales to or aggregate purchases from Foreign Persons in excess of $3 million.6 Accordingly, a Financial Services Provider is required to complete a BE-180 Filing even if it had only low-value Financial Services transactions with multiple Foreign Persons so long as the aggregate value of such sales or purchases exceeds $3 million. In determining whether the $3 million threshold is exceeded, the U.S. Reporter must include in its calculation all Financial Services transactions of the “consolidated U.S. enterprise” of which it is a part (and is permitted, but not required, to file on a consolidated basis).7 The form does not provide for any exemptions or exclusions for transactions with affiliates, and transactions should be reported regardless of whether the service was performed in the United States or abroad.
Practical Implications for Asset Managers
The activities of investment advisers and the funds they advise, both private and registered, may constitute reportable Financial Services transactions in several scenarios, including but not limited to the following: (1) a U.S. investment adviser to a non-U.S. fund or separate account has sales of Financial Services when it earns advisory fees from such non-U.S. fund or separate account;8 (2) a U.S. general partner (or managing member or similar) to a non-U.S. fund has sales of Financial Services when it earns carried interest or other performance allocations or incentive fees from such non-U.S. fund;9 and (3) a U.S. fund has purchases of Financial Services when it owes fees to a non-U.S. investment adviser, custodian, or broker-dealer.
Content of Form BE-180
U.S. Reporters will be required to provide data on total sales and/or purchases of each of the covered types of Financial Services transactions and must disaggregate the totals by country, by relationship to the Foreign Person and by type of Financial Service provided.10 The BEA reports are kept confidential and used for statistical analysis. The 2014 BE-180 form and related guidance are available here.
While the BEA encourages reporting by October 1, 2015, the BEA has granted automatic extensions (1) to November 1, 2015 for a U.S. Reporter that (a) has received a request for a BE-180 Filing and has a BE-180 identification number below 140012490 or (b) has not received a request and does not have a BE-180 identification number; and (2) to December 1, 2015 for a U.S. Reporter that has received a request for a BE-180 Filing and has a BE-180 identification number above 140012490. U.S. Reporters may request an additional (1) 30 day extension if the U.S. Reporter received a request for the BE-180 survey or (2) 60 day extension if the U.S. Reporter did not receive a request for the BE-180 survey, in each case so long as the extension request is submitted to the BEA prior to November 1, 2015.
Consequences for Failure to File
While the BEA has the ability to impose civil and, for willful violations, criminal penalties, the BEA has informally indicated that the most likely response to a missed filing is, in the first instance, notification of failure to file and a request for a filing.