US reduces foreign investment reporting burden

The US Commerce Department’s Bureau of Economic Analysis has eased the foreign investment reporting burden for certain private funds, with new rules taking effect on 21 November.

Under the amendments, financial commitments made to a US private fund by a foreign investor will no longer have to be reported to the BEA if that investor does not own 10 percent or more of the voting interest in any operating companies held by the fund.

Current legislation requires reporting of all holdings, regardless of the percentage holding a foreign entity may own.

The rules are designed to more clearly distinguish between direct and portfolio investments, with holdings of 10 percent or less to be considered in the latter category in the future.

It is thought U.S. private funds that invest exclusively in other private funds, or those that hold less than a 10 percent voting interest in operating companies – including limited partner interests – will benefit from the revised rules.

“While portfolio investments may need to be reported on Treasury International Capital forms instead, many asset managers already file both BEA surveys and TIC forms,” Michael T. Gershberg, corporate partner at law firm Fried Frank, said.

“Given the recent proliferation of BEA reporting requirements, it is worthwhile for private funds to consider whether this proposed reporting change may apply to their operations,” he added.