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Volume XII, Number 279

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It's Time Once Again: SHC Report of US Ownership of Foreign Securities Due March 4

Every five years, the Department of the Treasury conducts a benchmark survey on the ownership of foreign securities by US residents. Data is collected on Form SHC. Reporting is mandatory for all US resident custodians and US resident end-investors (e.g., funds and investment advisers) who:

  • own or manage $200 million in reportable foreign securities (such as securities issued by a non-US master fund);

  • manage, as custodians, the safekeeping of $200 million in reportable foreign securities for US persons; and

  • receive a letter from the Federal Reserve Bank of New York requiring them to report.

Who Is Required to Report?

US resident end-investors include private investment funds, venture capital companies, ETFs, collective investment trusts, mutual funds and other pooled investment funds; foundations; university endowments; public and private pension funds; and insurance companies.

Generally, reporting is the responsibility of the manager or investment adviser of a fund (or other US resident end-investor) it manages. US investment advisers should aggregate the amount of reportable securities they manage across all US clients for determining whether they meet the $200 million threshold.

What Is the Purpose of This Report?

The purpose of the SHC report is to gather timely and reliable information on the levels and changes in US international portfolio capital positions for the preparation of the official US balance of payments as well as for statistical series compiled and maintained by the International Monetary Fund.

What Is the Deadline to Report?

Data as of December 31, 2021 should be submitted to the Federal Reserve Bank of New York no later than March 4, 2022.

What Are Reportable Foreign Securities?

Only foreign securities are reportable. For these purposes, designation as a foreign security is based on the issuer’s country of organization. Securities issued by entities that are established under the laws of a non-US country and all securities issued by international organizations are considered foreign securities.

Reportable foreign securities may be traded in the US or in non-US countries, and may be denominated in any currency, including US dollars. Neither the country in which the securities are traded, nor the currency in which the securities are denominated, is relevant in determining whether the securities are reportable foreign securities.

What Types of Instruments Are Included and Excluded?

Reportable securities include equities (e.g., common stock, limited partnership interests, LLC interests and equity interests in funds), long-term debt, short-term debt and asset-backed securities.

Certain holdings are exempt from reporting on Form SHC. These include derivative contracts (including futures, forwards, swaps, options and warrants), loans and loan participation certificates, non-negotiable certificates of deposit, bank deposits, and “direct investments.” A “direct investment” includes the ownership of 10 percent or more of the voting equity securities of an incorporated foreign business or an equivalent interest in an unincorporated business enterprise. (However, most 10 percent or more investments in a private fund must be reported based on recent amendments to the Treasury’s definition of a “direct investment.”)

What Is Form SHC?

Treasury International Capital System (TIC) Form SHC is a three-part report:

  • Schedule 1 requires basic identifying information about the reporter and summary information about the contents of Schedule 2 and Schedule 3 of Form SHC.

  • Schedule 2 of Form SHC requires detailed information regarding foreign securities and is required if the fair value of reportable foreign securities equals or exceeds $200 million. (US resident end-investors that hold reportable foreign securities through unaffiliated US resident custodians are not required to report those securities on Schedule 2.)

  • Schedule 3 requires information regarding the US-resident custodian(s) holding the reportable foreign securities. (A separate Schedule 3 is required for each US custodian holding $200 million or more in reportable foreign securities.)

Where to Find Additional Information?

Form SHC and related filing instructions are available here.

©2022 Katten Muchin Rosenman LLPNational Law Review, Volume XII, Number 34
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About this Author

Henry Bregstein, Katten Muchin Law Firm, Financial Institutions Legal Specialist
Partner

Henry Bregstein is the global co-chair of the firm’s Financial Services practice and a member of the firm’s Executive Committee and Board of Directors. In his role as partner in the Financial Services practice, he advises banks, domestic and offshore hedge funds, private equity funds, life insurance companies, family offices, sovereign wealth funds, investment advisers and broker-dealers on regulatory, securities, tax, finance, licensing, corporate and other legal matters.

Henry provides guidance on fund formation and regulatory compliance and advice related to...

212-940-6615
Wendy E. Cohen, Financial Services Lawyer, Katten Muchin Law firm
Partner

Wendy E. Cohen represents investment managers and other sponsors of domestic and offshore securities and commodities hedge funds, funds of funds and other public and private pooled investment vehicles, as well as their service providers, including their managers, brokers, financial intermediaries and other financial institutions, and investment professionals. She provides advice on all corporate and related matters facing investment funds, including structure and organization, ongoing operations, restructuring and dissolution.

Having practiced for...

212-940-3846
Gary DeWaal, Securities Attorney, Katten Law Firm, New York
Special Counsel

Gary DeWaal focuses his practice on financial services regulatory matters. He counsels clients on the application of evolving regulatory requirements to existing businesses and structuring more effective compliance programs, as well as assists in defending and resolving regulatory disciplinary actions and enforcement matters. Gary also advises buy-side and sell-side clients, as well as trading facilities and clearing houses, on the developing laws and regulations related to cryptocurrencies and digital tokens.

Previously, Gary was a senior...

212-940-6558
Mark Goldstein, Katten Law Firm, New York, Financial Law Attorney
Special Counsel

Mark Goldstein focuses his practice on advising investment advisers, mutual funds and private investment funds. Mark has more than 25 years of experience advising clients on compliance and regulatory requirements, corporate matters, and the federal securities laws. He has extensive experience advising on the formation, distribution, structuring and on-going operational aspects of a wide array of investment products, including mutual funds, private investment funds, offshore funds, funds offered to separate accounts of insurance companies as funding vehicles for variable...

212-940-8507
Allison C. Yacker, Katten Muchin, Corporate regulatory Matters Lawyer, Offshore Hedge Funds Attorney
Partner

Allison Yacker, co-chair of the New York Financial Services group, represents domestic and offshore hedge funds, including fund of funds, private equity funds, commodity pools, investment managers, managed account platforms, banks and broker-dealers on a broad range of corporate, securities, finance and other regulatory matters. She provides structuring, organization and ongoing advice related to hedge funds and private equity funds that employ a broad range of investment strategies and regularly counsels investment managers with respect to state and federal registration...

212.940.6328
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