Every five years, the Bureau of Economic Analysis (“BEA”) of the U.S. Department of Commerce conducts a comprehensive Benchmark Survey of U.S. Direct Investment Abroad (“Form BE-10” or “Survey”). Every “U.S. Person” that owns or controls a “Foreign Affiliate” during such U.S. Person’s 2014 fiscal year must file Form BE-10 by May 29, 2015 (or June 30, 2015 for those filing 50 or more forms) (a “U.S. Reporter”). Each U.S. Reporter must file a Form BE-10A for itself, and a Form BE-10B, BE-10C and/or BE-10D for each of its Foreign Affiliate(s) (as applicable, generally based on specified financial thresholds), whether or not contacted by the BEA. Form BE-10 and instructions can be found on the BEA’s website here.
“U.S. Person” means any natural person or entity resident in the United States or subject to the jurisdiction of the United States (according to the BEA, this definition includes private funds and, in some cases, their general partners and investment managers). “Foreign Affiliate” means a foreign “business enterprise” in which a U.S. Person, directly or indirectly, owns or controls 10% or more of the voting securities. “Business enterprise” means any organization, association, branch or venture (whether or not incorporated) which exists for profit-making purposes or to otherwise secure economic advantage, and any ownership of any real estate.
Below are some examples of U.S. Reporters in the private fund context that generally will be required to file a Form BE-10 by the filing deadline:
- A U.S. Person private fund that made an investment in a Foreign Affiliate (such as a non-U.S. master fund, special purpose vehicle or operating company) during the fund’s 2014 fiscal year
- A U.S. Person that was a general partner of a private fund described in the bullet point above during the general partner’s 2014 fiscal year
- A U.S. Person that was a general partner of an offshore private fund structured as a limited partnership during the general partner’s 2014 fiscal year
- A U.S. Person investment manager to an offshore fund that was a “Foreign Affiliate” of the investment manager during its 2014 fiscal year (this scenario generally would be unlikely unless the investment manager owned voting securities in the offshore fund)
- Any other U.S. Person that owned or controlled a “Foreign Affiliate” (such as a non-U.S. advisory affiliate, broker-dealer, solicitor or placement agent) during the U.S. Person’s 2014 fiscal year
According to the BEA’s recently released “FAQs” regarding the Survey, if a U.S. Person investment manager has majority voting interest in several private funds (again, we believe that this would be unusual), and one or more of these funds qualify as a U.S. Reporter, then the investment manager and the majority-owned U.S. Reporter funds must be consolidated on one Form BE-10A. However, if a U.S. Person investment manager manages, but does not have majority voting interest in, several U.S. funds, each entity should file its own Form BE-10A if it separately qualifies as a U.S. Reporter. For a fund that is a limited partnership, BEA considers the general partner to control 100% of the voting interests in the limited partnership, unless the limited partnership agreement provides otherwise. Thus, the same consolidation guidelines described above also would apply for U.S. Person general partners.
If a U.S. Person had no Foreign Affiliates during its 2014 fiscal year, and was contacted by BEA, then it must file a “BE-10 Claim for Not Filing” by the due date of the Survey to report having no Foreign Affiliates.
The BEA will consider reasonable requests for an extension of the filing deadline for Form BE-10, provided that such requests include substantive reasons to justify an extension and are received no later than the original due date of the Form BE-10.
The information filed in Form BE-10 may be used by the BEA only for analytical and statistical purposes, and cannot be published in any way that would identify the filer.
Failure to file a required report could result in civil penalties ranging from $2,500 to $25,000, as well as injunctive relief. Willful failure to report could result in fines and criminal penalties for the applicable entity and any of its officers, directors, employees or agents who knowingly participated in such violation.
This is intended only as a brief, general summary concerning the Survey. If you have specific questions about whether or not you need to file Form BE-10, or how to respond to any items on Form BE-10, please contact us.