NEW FinCEN REPORTING RULES – APPLICATION TO FUND MANAGERS AND THEIR FUNDs
OCTOBER 1, 2024
In Plain English
A publication of THE SECURITIES LAW GROUP | James E. Grand | October 1, 2024
Fund managers must consider the new regulations that will result from the now-effective Corporate Transparency Act (“CTA”)—in particular, the new regulations implementing the beneficial ownership information or “BOI” reporting requirements. You should read this bulletin carefully. Admittedly, it is a boring but essential subject.
Compliance dates for BOI reports are upon you. Specifically, if you are a reporting company formed any time before January 1, 2024, you will need to file an initial BOI report reflecting beneficial ownership by January 1, 2025. If your entity was formed any time between January 1, 2024 and December 31, 2024, you are required to file an initial BOI report within 90 days of the entity’s registration date. If your reporting company is formed after January 1, 2025, the initial BOI report is due within 30 days of the entity’s registration date.
NONCOMPLIANCE COULD RESULT IN A CIVIL PENALTY OF UP TO $591 PER DAY AND CRIMINAL PENALTIES OF UP TO $10,000 AND UP TO 24 MONTHS IN PRISON
The BOI reporting rule exempts 23 classes of entities which are not required to submit BOI reports. Of the 23 exemptions, there are exemptions that are likely to be used for fund managers and their funds. That said, the application of the regulation to registered investment advisers, exempt reporting advisers and fund vehicles is complex.
Investment Advisers Registered With the SEC
SEC-registered investment advisers (“RIAs) already are disclosing beneficial ownership information on FORM ADV in connection with registration requirements. Consequently, an adviser that is an investment adviser registered with the SEC under the Advisers Act is an exempt entity. SEC-registered advisers are not subject to the BOI reporting regulations.
Exempt Reporting Advisers.
There is no similar exemption for exempt reporting advisers or state-registered investment advisers. Like their SEC-registered counterparts, state-registered investment advisers and exempt reporting advisers also disclose their beneficial ownership on FORM ADV. Nevertheless, they are subject to the BOI reporting regulations. In other words, these advisers do have BOI reporting obligations.
Investment Vehicles
The only pooled investment vehicles that are exempt from BOI reporting requirements are funds which are operated or managed by an SEC-registered investment adviser. Notably, just as exempt reporting advisers do not fall under any exemption from the BOI reporting requirements, funds
which are operated or managed by an exempt reporting adviser do not fall under any an exempt category. Like exempt reporting advisers themselves, any non-exempt funds they manage are subject to the BOI reporting regulations. Note: exempt reporting advisers who manage one or more funds may have to file multiple BOI reports. For example, assume your LLC is registered as an exempt reporting adviser and it manages two funds. In this example, you will be required to file three BOI reports—one for the LLC, one for Fund I and another for Fund 2.
HOW TO COMPLETE YOUR BOI REPORT(S)
The Securities Law Firm does not file BOI Reports for clients. It is compliance function. Clients have two different options for complying with the regulations and filing BOI Reports. You may file the reports yourself. Note, however, that the complexity of the reporting requirements can create challenges and risks for firms with limited in-house expertise. We recommend that clients use CT Corporation’s Beneficial Ownership Secure Platform. To access this tool, go to ctc.wolterskluwer.com/lf-boi and click on the FILE NOW tab. This will take you a sign in page where you can register to access the Platform and pay the $199 fee.
The Securities Law Group
James Grand
jgrand@tslg-law.com
760-773-4700
