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Treasury Form SHC and Private Fund Advisers

Form SHC is due once every five years as part of a survey conducted by the Department of the Treasury soliciting information identifying ownership of foreign securities by US residents. Form SHC is due on March 3 for the year ending December 31, 2016.

An adviser to hedge funds, private equity funds or other private investment funds may have to file Form SHC if its private funds that are organized in the United States own, in the aggregate, at least $200 million of foreign securities. A private fund adviser also will be required to file Form SHC, even without meeting the foregoing threshold, if instructed to do so by the Federal Reserve Bank of New York (FRBNY). Note that US custodians, as well as US residents that are not private funds or private fund advisers, have Form SHC reporting obligations as well.

For purposes of calculating $200 million of foreign securities, reporters should include, among other things, their gross long positions in: (1) foreign equity securities; (2) short-term and long-term foreign debt securities; (3) foreign asset-backed securities; and (4) equity or other securities issued by foreign investment vehicles. Foreign securities entrusted to US-resident custodians that are in turn held at a US-resident central securities depository (such as the Depository Trust Company or FRBNY), or a foreign-resident central securities depository (such as Euroclear or Clearstream), must be reported by the US-resident custodian, not by the US- or foreign-resident central securities depository. Likewise, foreign securities held by a US-resident end-investor directly with a US-resident or foreign-resident central securities depository must be reported by the US-resident end investor, not by the central securities depository.

“Direct investments” do not need to be reported. A “direct investment” relationship exists when a US resident owns 10 percent or more of the voting equity securities of an incorporated foreign business (or an equivalent interest in an unincorporated foreign business or branch). Ownership by US feeder funds of shares or interests in affiliated non-US master funds that do not carry voting rights are not direct investments, even if greater than 10 percent, and must be included.

Form SHC, including filing instructions, can be found here.

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume VII, Number 34

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About this Author

Jack P. Governale, Katten Muchin Law Firm, Financial Services Attorney
Partner

Jack P. Governale is the head of Katten’s New York Financial Services practice. Jack is a Registered Foreign Lawyer and a non-practicing partner in Katten Muchin Rosenman UK LLP. He concentrates his practice in the area of investment management, representing domestic and offshore private investment funds and their managers, as well as investment advisers, commodity pool operators, and commodity trading advisors.

Jack advises his fund and investment manager clients on a broad range of securities and futures regulatory matters arising under the Securities Act, the...

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