As part of the system designed by the Department of the Treasury (the “Treasury”) to measure portfolio investment into and from the United States, known as the Treasury International Capital (“TIC”) reporting system, the Treasury has released final instructions for the reporting requirements of TIC Form SLT (“Form SLT”). Form SLT is a mechanism by which the Treasury can gather information on foreign investor holdings of U.S. securities and U.S. investor holdings of foreign securities, and will require investment advisers to mutual funds, among others, to file reports with the Treasury regarding such holdings. This information is generally used to track capital flow in international capital markets and to construct and formulate international financial and capital market policy.
In general, Form SLT requires that (i) U.S. resident custodians report long-term U.S. securities held by the custodian on behalf of foreign residents and long-term foreign securities held by the custodian on behalf of U.S. residents, (ii) U.S. resident end investors (such as a U.S.-resident investment adviser) report investments in long-term foreign securities for their own portfolios or for the portfolios of their clients that are not held by U.S. resident custodians and (iii) U.S. resident issuers report long-term U.S. securities held by foreign resident investors, in each case where the consolidated total of all reportable long-term U.S. and foreign securities equals or exceeds the exemption level (currently $1 billion) (the “Exemption Level”) on the last business day of the reporting month. A long-term security generally includes a debt or an equity security with either no stated maturity or with an original maturity exceeding one year.
Form SLT reports must be filed by financial and non-financial organizations; managers of private and public pension funds, mutual funds and private investment funds or any other similarly pooled, commingled funds; foundations and endowments; and funds and other similar entities that either own shares or units of, or other equity interests in a foreign related or non-related entity (e.g., a U.S.-based feeder fund owning shares of an offshore-based master fund), or has its shares or units, or other equity interests held by foreign related or non-related entities, that hold foreign long-term securities, or that have issued U.S. long-term securities held by foreign residents, that equal or exceed, in the aggregate, the Exemption Level.
Of particular note to U.S. investment advisers and fund managers is the requirement that such entities must report investments in foreign securities for their own account or for the account of their clients that are not held (and therefore reported) by a U.S.-resident custodian. In addition, to the extent such an investment adviser or fund manager is required to file Form SLT in any month, it will be required to include a report of the covered holdings and issuances of all U.S resident parts of its own organization and of all U.S. resident entities (including funds) that it advises/manages, on a consolidated basis. Reporting obligations under Form SLT are placed on custodians and/or investment advisers of mutual funds, exchange-traded funds, and other pooled, commingled funds, and such funds are not independently obligated to file reports.