On February 25, 2020, the U.S. Department of Commerce's Bureau of Economic Analysis (BEA) issued a proposed rule to renew the BE-180 Benchmark Survey of Financial Services Transactions between U.S. Financial Services Providers and Foreign Persons. The BEA issues the BE-180 every five years; this round will cover fiscal year 2019 and will be due in mid-2020 (currently by July 31, 2020, or August 31, 2020 using BEA's eFile system). U.S. financial service providers within its scope will be required to respond (regardless of whether they are individually contacted by BEA) and provide information on transactions with foreign persons. Given the broad scope of the potential respondent universe and transactions, U.S. financial institutions and investment managers should take note of the upcoming survey and begin to evaluate the scope of their potential reporting obligations. BEA is accepting comments on this proposed rule through April 27, 2020.
The BE-180 Survey and Reporting Requirements
The BE-180 survey gathers comprehensive information on transactions between U.S. financial services providers and foreign persons in order to evaluate the magnitude and impact of U.S. international financial services transactions. Like other BEA surveys, the BE-180 survey covers transactions with affiliated and unaffiliated foreign entities, including foreign funds. U.S. respondents should focus on the country in which the counterparty is incorporated or organized, not the country where the parties or assets are located, to determine whether a transaction is reportable. The survey form requires reporting total annual sales to and purchases from foreign persons on an aggregated basis per foreign country for each type of financial service. The report covers the company's 2019 fiscal year, and only one form is required per consolidated U.S. entity.
Respondents with sales or purchases exceeding $3 million will be required to provide complete responses to the survey. As will be discussed in the following section, respondents with sales or purchases less than $3 million will be required to provide a limited set of data only. The $3 million threshold applies separately to sales and purchases; mandatory reporting requirements may apply only to sales, only to purchases, or to both sales and purchases.
The BE-180 covers sales and purchases of the following types of financial services:
1. Brokerage services related to equity transactions;
2. Other brokerage services;
3. Underwriting and private placement services (related to debt or equity transactions);
4. Financial management services;
5. Credit-related services, except credit card services;
6. Credit card services;
7. Financial advisory and custody services;
8. Securities lending services;
9. Electronic funds transfer services; and
10. Other financial services (including asset pricing services, security exchange listing fees, demand deposit fees, exit fees, and others).
Asset managers should note that the "financial management services" category may apply to them. The instructions for the BE-180 survey note that asset managers should report fees (including incentive allocations) for transactions in which the manager has the authority to direct the use or investment of funds or other assets. This includes the management of foreign commodity pools, mutual funds, hedge funds, private equity funds, and trusts.
Changes from the 2015 BE-180 Survey
The BEA's proposed rule would make certain changes from the reporting requirements that applied during the previous survey in 2015. Most notably, in 2015 respondents with transactions in covered services below the $3 million threshold for mandatory reporting only needed to provide the aggregate value of sales and purchases of covered services. For the 2020 survey, respondents with transactions in covered services below the $3 million threshold will have to disaggregate the total dollar amount of their sales and purchases by transaction type.
Additionally, BEA is proposing to add five items to the survey:
- Legal Entity Identifier (LEI) of the survey respondent, if the respondent has one -- obtaining an LEI will not be required for respondents without an LEI;
- Respondents who reported financial management transactions would be required to disaggregate these transactions by type of account (e.g., hedge fund, private equity fund, mutual fund);
- Respondents who reported financial management transactions would be required to report, in a table, whether the transactions included fees that are tied to performance and, if so, the timing of those performance fees;
- Mandatory questions to collect information on financial services conducted remotely (where both the supplier and the consumer were in different territories when the service was delivered); and
- Identification of any reported transactions that were related to cryptocurrency activities.
The scope of the BE-180 survey is quite broad and requests more information than in previous years. The proposed rule reflects BEA's desire to learn more about the details of cross-border financial services, particularly cryptocurrency transactions. Because the BE-180 form requires compilation of a significant amount of data, companies who are involved in the sales or purchases of covered financial services should begin compiling data well in advance of the filing deadline. We anticipate that BEA will release the BE-180 survey after it issues its final rule in May or June 2020, and responses will be due later this summer.