Proposed Rulemaking by the Bureau of Economic Analysis Could Result in Mandatory Reporting Obligations for Large Swath of U.S. Financial Services Providers

February 12, 2015

BY CHARLES A. PATRIZIA, SCOTT M. FLICKER & DANA M. STEPNOWSKY

On January 27, 2015, the Bureau of Economic Analysis (“BEA”) issued a Notice of Proposed Rulemaking that would, if finalized, create new reporting requirements for the BE-180, Benchmark Survey of Financial Services Transactions between U.S. Financial Services Providers and Foreign Persons.

Importantly, if the proposed rule is made final, the BEA intends to expand the filing obligations to all qualifying U.S. financial services providers whether or not they have received notice from the BEA. Under the current regulations, persons subject to the reporting requirements of the BE-180 are only required to respond if they are notified by the BEA.

The BEA will accept comments on this proposed rule until 5:00 p.m., March 30, 2015.

The BEA, an agency of the U.S. Department of Commerce, publishes comprehensive statistics on the United States economy. To produce these reports, the BEA collects data directly from companies and other sources, produces economic models and estimates, and conducts research and analysis. Among the economic data compiled and disseminated by the BEA are statistics on financial services transactions between U.S. financial services providers and foreign persons.

The BE-180, Benchmark Survey of Financial Services Transactions between U.S. Financial Services Providers and Foreign Persons (“BE-180 Survey”) is a mandatory survey conducted once every five years by the BEA pursuant to the International Investment and Trade in Services Survey Act[1] and by Section 5408 of the Omnibus Trade and Competiveness Act of 1988. The last survey was conducted in 2010 (reporting for FY2009). If the proposed rule is made final, the changes will likely apply to the next benchmark survey to be completed in 2015 (reporting for FY2014).

Current Rule

Under the current regulations, U.S. financial services providers must complete the BE-180 Survey if total financial services receipts or purchases from foreign persons exceeded $3 million during the benchmark fiscal year for the sale or purchase of:

Brokerage services related to equity transactions
Other brokerage services
Underwriting and private placement services
Financial management services
Credit-related services
Credit card services
Financial advisory and custody services
Securities lending services
Electronic funds transfer services; or
Other financial services

However, currently only persons notified in writing of their filing obligation by the Bureau of Economic Analysis are required to complete the survey.[2]

Proposed Changes

The BEA proposes to add one item to the benchmark survey form. Specifically, the proposed rule will require reporting companies to provide information related to equity- and debt-related underwriting transactions. The BEA believes this information is readily available from the accounting records of reporting companies. The amendments will also include changes to the questionnaire design. Additionally, the BEA hopes to revise survey instructions and data item descriptions in order to improve clarity and to make the benchmark survey forms more consistent with those of other BEA surveys.

Notably, if the proposed rule is made final, persons subject to the reporting requirements of the BE-180 will be required to respond whether or not they are notified by the BEA. Earlier this year, we reported on a similar rule change applicable to the BE-13 Survey of New Foreign Direct Investment in the United States. In many cases, the changes to the BE-13 Survey triggered time-consuming reporting obligations for many companies that had not previously been required to complete BEA surveys. Thus, if the proposal becomes final, any company whose receipts or purchases from foreign persons exceeded $3 million in the benchmark fiscal year, for the services listed above (including underwriting transactions) will be required to submit a BE-180 Survey. Affected companies may wish to file comments, including particularly on the burden that would be caused by the expanded mandatory filing requirement.

U.S. financial services providers should consult with counsel to remain informed of the status of the proposed changes to the BE-180 Survey. If the proposed rules take effect the BE-180 Survey requirements will be applicable regardless of whether a financial services provider receives notification directly from the BEA.

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[1] 22 U.S.C. § 3101-3108; see also 15 C.F.R. Part 801 (“Survey of International Trade in Services Between U.S. and Foreign Persons and Surveys of Direct Investment”).

[2] See 15 C.F.R. § 801.3.