Are Pooled Investment Vehicles Exempt From The Corporate Transparency Act?

There are 23 separate exemptions from the CTA's beneficial ownership reporting requirement. The exemptions are listed in order in FinCEN's Final Rule at 31 CFR 1010.380 and take effect on January 1, 2024.

CTA Exemptions Generally

In general, the CTA exempts companies that already report their beneficial ownership to the U.S. government under a separate legal framework. FinCEN's Final Rule addresses each exemption separately in subsection 1010.380(c)(2).

Exemption Number 18 - Pooled investment vehicle

Subsection 1010.380(c)(2)(xviii) of the Final Rule exempts:

(xviii) Pooled investment vehicle. Any pooled investment vehicle that is operated or advised by a person described in paragraph (c)(2)(iii), (iv), (vii), (x), or (xi) of this section.

What Qualifies as a Pooled Investment Vehicle?

The exemption has two prongs. To be exempt, the reporting must be (1) a pooled investment vehicle, that is (2) operated or advised by a person described in paragraph (c)(2)(iii), (iv), (vii), (x), or (xi) of this section.

The referenced exemptions relate to (a) banks (subsection (c)(2)(iii)), (b) credit unions (subsection (c)(2)(iv)), (c) brokers or dealers in securities (subsection (c)(2)(vii)), (d) investment companies or investment advisers (subsection (c)(2)(x)), and (e) venture capital fund advisers (subsection (c)(2)(xi)). Each of these categories is defined in a separate prong of Section 1010.380(c)(2) of the Final Rule.

The first prong relates to the term "pooled investment vehicle" which is defined in Section 1010.380(f)(7) of the Final Rule as:

(7) Pooled investment vehicle. The term "pooled investment vehicle" means:

(i) Any investment company, as defined in section 3(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(a)); or

(ii) Any company that:

(A) Would be an investment company under that section but for the exclusion provided from that definition by paragraph (1) or (7) of section 3(c) of that Act (15 U.S.C. 80a-3(c)); and

(B) Is identified by its legal name by the applicable investment adviser in its Form ADV (or successor form) filed with the Securities and Exchange Commission or will be so identified in the next annual updating amendment to Form ADV required to be filed by the applicable investment adviser pursuant to rule 204-1 under the Investment Advisers Act of 1940 (17 CFR 275.204-1).

In FinCEN's discussion that accompanied the Final Rule, FinCEN noted that, "according to information provided by SEC staff, as of December 2021 there were 115,756 pooled investment vehicle clients reported by registered investment advisers. Of these, 6,438 are registered with a foreign financial regulatory authority."

Consequently, FinCEN's expectation is that the pooled investment vehicle exemption should be available for a pooled investment vehicle that is reported to the SEC as such by the regulated bank, credit union, investment company, investment adviser, or venture capital adviser that operates or advises it.

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