February 2014
Practice Groups:
Investment
Management
Hedge Funds and
Venture Funds
Investment Advisers and Funds–New Treasury
Report Form for Foreign Claims and Liabilities
By Clifford J. Alexander and Beth Clark
The Department of the Treasury recently amended Treasury International Capital (“TIC”) B
forms to explicitly require reporting of cross-border claims on, and liabilities to, foreign
residents by savings and loan holding companies and “other financial institutions,” which
includes “investment advisers and managers, mutual funds, money market funds, pension
funds, private equity funds, real estate investment trusts, credit card issuers, hedge funds,
trusts, financial companies, mortgage companies, futures commission merchants and
insurance companies.” Previously, TIC B reporters were limited to depository institutions
located in the United States, bank holding companies, financial holding companies and
securities broker-dealers. Investment advisers historically reported on TIC C forms, but are
now subject to TIC B.
TIC B forms are designed to collect information from U.S.-resident reporters and their
customers of claims on, and liabilities to, foreign residents and vice versa. The information
gathered from the forms is used, on an aggregate basis, to report on U.S. cross-border
financials positions, U.S. balances of payments and international statistics.
Which particular form or forms must be completed depends on whether (1) cross-border
claims or liabilities are being reported; (2) cross-border claims or liabilities are being reported
with respect to the U.S. financial institution or its customers; or (3) cross-border claims or
liabilities are denominated in U.S. Dollars or a foreign currency, as set forth below, along with
other relevant information for each form. For a U.S. financial institution that is an investment
adviser, the investment vehicles that the investment adviser manages are considered the
investment adviser’s “customers.” A U.S. investment adviser should consolidate the
reportable claims and liabilities (as further described below) of the U.S. and foreign
investment vehicles it manages, if the investment vehicles’ assets are not held by a U.S.
custodian.
TIC B Report Forms
The table below describes the six types of monthly and quarterly TIC B forms, the reporting
frequency and the reporting thresholds with respect to each form. There are two types of
thresholds: one is based on the aggregate dollar value of all cross-border claims or liabilities;
and the other is based on total claims or liabilities with respect to one country. The
appropriate form must be filed if reportable claims or liabilities meet or exceed that form’s
threshold. With respect to forms where there are two thresholds, the form must be filed if
either threshold is met.
INVESTMENT ADVISERS AND FUNDS–NEW TREASURY
REPORT FORM FOR FOREIGN CLAIMS AND LIABILITIES
FORM
BC
REPORT
Report of U.S. Dollar Claims of Financial
Institutions on Foreign Residents
FREQUENCY
Monthly
THRESHOLD
$50 million in
aggregate or $25
million individual
country
BL-1
Report of U.S. Dollar Liabilities of Financial
Institutions to Foreign Residents
Monthly
$50 million in
aggregate or $25
million individual
country
BL-2
Report of Customers’ U.S. Dollar Liabilities to
Foreign Residents
Monthly
$50 million in
aggregate or $25
million individual
country
BQ-1
Report of Customers’ U.S. Dollar Claims on
Foreign Residents
Quarterly
$50 million in
aggregate or $25
million individual
country
BQ-2
Part 1: Report of Foreign Currency Liabilities
and Claims of Financial Institutions and of
their Domestic Customers’ Foreign Currency
Claims with Foreign Residents
Quarterly
Part 1: $50 million
in aggregate or
$25 million
individual country
Part 2: Report of Customers’ Foreign
Currency Liabilities to Foreign Residents
BQ-3
Report of Maturities of Selected Liabilities and
Claims of Financial Institutions with Foreign
Residents
Part 2: $50 million
in aggregate–no
individual country
limit
Quarterly
$ 4 billion–no
individual country
limit
Reportable Claims and Liabilities
For purposes of determining whether a financial institution meets the applicable threshold,
reportable cross-border claims of U.S.-resident financial institutions on foreign residents
include:
• deposit balances due from banks of any maturity (including non-negotiable CDs);
• negotiable certificates of deposit of any maturity;
• brokerage balances;
• loans and loan participations of any maturity;
• resale agreements and similar financing agreements;
• short-term negotiable and non-negotiable securities (original maturity of one year or
less);
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INVESTMENT ADVISERS AND FUNDS–NEW TREASURY
REPORT FORM FOR FOREIGN CLAIMS AND LIABILITIES
• money market instruments (e.g., commercial paper, bankers’ acceptances) with an
original maturity of one year or less;
• accrued interest receivables (including for short-term and long-term securities) and
account payables; and
• reinsurance recoverables;
but exclude:
• long-term securities (no contractual maturity or an original maturity of over one year);
• credit commitments and contingent liabilities;
• derivatives, including forwards, futures, options, swaps and warrants; and
• spot foreign exchange contracts.
Similarly, for purposes of determining whether a financial institution meets the applicable
threshold, reportable cross-border liabilities of U.S.-resident financial institutions to foreign
residents include:
• non-negotiable deposits of any maturity, including non-negotiable certificates of
deposit;
• brokerage balances;
• overdrawn deposit accounts;
• loans, including margin loans payable, of any maturity excluding drawn syndicated
loans where there is a U.S. administrative agent;
• short-term non-negotiable securities (an original maturity of one year or less);
• repurchase agreements and similar financing agreements;
• accrued interest payables (for short-term and long-term securities) and account
payables;
• insurance technical reserves; and
• prepaid insurance premiums;
but exclude:
• foreign residents’ deposits or brokerage balances swept into money market or other
mutual funds;
• securities lending agreements in which one security is lent in return for another;
• loans from a foreign resident that are serviced by a U.S. resident;
• negotiable certificates of deposit; and
• negotiable short-term securities.
Investment Advisers
When determining whether a U.S. financial institution, such as an investment adviser, meets
the reporting thresholds and, therefore, has a TIC B filing obligation on behalf of itself and/or
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INVESTMENT ADVISERS AND FUNDS–NEW TREASURY
REPORT FORM FOR FOREIGN CLAIMS AND LIABILITIES
its investment vehicles, it is important to consider not only investments and loans
themselves, but claims on, or liabilities to, third-party service providers. For example, a U.S.
investment adviser may have multiple U.S. investment vehicles with brokerage balances at a
variety of UK prime brokers, all of which must be aggregated to determine whether the single
country limit for Form BL-2 has been exceeded. An investment adviser is not required to
count claims or liabilities of an investment vehicle that it manages if such claims or liabilities
are being reported by another TIC B filer, such as the investment vehicle’s U.S. custodian.
Registered Investment Companies
An investment adviser to a registered investment company (a “RIC”) typically will not be
subject to a reporting requirement with respect to the RICs’ cross-border claims and liabilities
because the RIC’s assets are held in the custody of U.S. banks. A RIC’s cross-border claims
and liabilities generally will be reported by its U.S. bank. However, if a RIC has unpaid fees
owed to one or more unaffiliated foreign subadvisers, a filing might be required. Additionally,
some RICs may self-custody certain claims or obligations, such as loan participations, that
its U.S. bank would not report. In those cases, a report may be required by the RIC’s
investment adviser.
Determining Reporting Obligations
Investment advisers should conduct an examination of their cross-border relationships and
transactions to determine whether they have an obligation to file TIC B reports covering their
own claims or liabilities as well as those of their customers. This should include a list by
country of the following: (1) foreign investments not held by a U.S. custodian; (2) foreign
subadvisers and other service providers; and (3) anticipated ranges of claims and liabilities
associated with the each cross-border relationship and holding.
Due Dates
Monthly reports (TIC BC, BL-1 and BL-2) are due the 15th calendar day following the last
day of the month, and quarterly reports (TIC BQ-1, BQ-2 and BQ-3) are due the 20th
calendar day following the last day of March, June, September and December. If the due
date of a report falls on a weekend or holiday, the due date is the following business day.
The amendments went into effect with respect to reports due starting in January 2014.
Consequently, the first monthly reports were to be filed as of January 15, and the first
quarterly reports were to be filed as of January 20. The Federal Reserve Bank of New York,
who administers the collection and processing of TIC filings, will consider an extension of the
filing deadline on a case-by-case basis.
For more information about the TIC B forms and reporting requirements, please visit the
following link: http://www.treasury.gov/resource-center/data-chart-center/tic/Pages/formsb.aspx.
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INVESTMENT ADVISERS AND FUNDS–NEW TREASURY
REPORT FORM FOR FOREIGN CLAIMS AND LIABILITIES
Authors:
Clifford J. Alexander
clifford.alexander@klgates.com
+1.703.380.8500
Beth Clark
beth.clark@klgates.com
+1.202.368.9132
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