Investment regulation - U.S.A.
Reference
Regulatory structure
Please refer to the Investment regulation - U.S.A. page for the complete information about the regulatory structure.
Holding restrictions
Holding restrictions – Register Market – U.S.A.
Disclaimer
The information contained in the Holding Restrictions is based on the legal opinion obtained by CBL that was issued on 27 February 2019. CFCL believes the information to be correct as of that date but disclaims any responsibility as to the accuracy and completeness of the information after that date. In the case of discrepancy between the information provided by CFCL and the local laws and regulations, the latter shall prevail. The Holding Restrictions do not constitute legal advice and clients should seek advice from independent professional counsel.
Clients are responsible for ensuring compliance with the disclosure requirements and agree to indemnify and hold harmless CFCL for any loss, expense, liability, damage or claims, whether direct or indirect, against or incurred by CFCL arising out of or resulting from such non-compliance.
Restrictions on clients
Ultimate beneficial owners and clients who are domiciled in the United States of America are not allowed to hold U.S. domiciled investment funds on the register market through CFCL. It is the responsibility of the client to ensure compliance with the restriction.
Certain funds may also impose specific restrictions on investor domicile. Clients must refer to and abide by the restrictions (if any) contained in the fund documents before entering into transactions.
Restrictions on settlement
There is no general restriction on settlement on American investment funds through CFCL. However, certain funds may impose specific settlement/transfer restrictions. Clients must refer to and abide by the restrictions (if any) contained in the fund prospectus before entering into transactions.
Holding restrictions – CSD Market – U.S.A.
Obligation to report threshold crossings
All investors, resident or non-resident, who acquire a 5% or greater share of one class of an equity issue, must disclose the specifics of the transaction directly to the SEC within 10 calendar days of acquisition (Rule 13D of the Securities Exchange Act 1934). No intermediation from Clearstream Banking is required.
Every investment manager that exercises investment discretion with respect to account holding section 13(F) securities, as defined in Rule 13, having an aggregate fair market value on the last trading day of any month of any calendar day of at least USD 100 million shall file a report on Form 13F with the SEC within 45 calendar days after the last day of such calendar year and within 45 calendar days after the last day of each of the first three calendar quarters of the subsequent calendar year (Rule 13F-1 of the Securities Exchange Act 1934). No intermediation from Clearstream Banking is required.
Please refer to the Securities Exchange Act 1934 for details of sanctions in case of non-compliance.
Foreign ownership restrictions
Restrictions on direct foreign investment in certain industries exist, such as aviation, banking, communications, defence, energy, mining, real estate, etc. The list is non-exhaustive.
Certain provisions prevent direct investment in such industries, while other provisions allow them to do so under guided circumstances.
Please refer to Investment regulation - U.S.A. for complete information on disclosure requirements for U.S.A.
Disclosure requirements
Introductory information and categories
This section provides general information about the disclosure requirements for fund securities holdings with which Clearstream Fund Centre must, according to the information available at the time of the present publication, comply with each of the domestic markets and fund markets covered by the Disclosure Requirements.
Fund securities that are held remotely are usually not disclosed by CFCL. A disclosure request received by CFCL regarding such a holding will be forwarded to the relevant client without assessing its validity and the CFCL client shall handle the request on a voluntary basis.
Disclosure Requirements are only available for those countries where CFCL has a link to the respective domestic market or direct access to local domiciled funds that are held in Clearstream’s name on the register.
For fund securities holdings where CFCL has no such link or direct access to the register, clients must be aware that local laws might provide for mandatory disclosure. A disclosure request in this regard will be forwarded to clients without assessing its validity. Clients commit not to unreasonably withhold their consent to such a request and agree to indemnify CFCL for damages resulting directly from non-compliance with mandatory local disclosure requirements.
In most cases, the obligation to disclose is based on the domestic equivalent of a Companies Act, relevant investment funds act or anti-money laundering act and covers all security types.
In some instances, the obligation to disclose is based on stock exchange laws or regulations and only applies to listed domestic and foreign securities.
The Disclosure Requirements do not constitute legal advice and the clients should seek independent professional advice in relation to fund securities deposited with CFCL, especially as, for those jurisdictions in which no disclosure obligation falls on CFCL, there may be separate disclosure requirements that apply directly to clients of CFCL, shareholders and beneficial owners.
Note: CFCL is not always given comprehensive information or advised of changes affecting local disclosure requirements.
It remains the sole responsibility of the client to ensure compliance with local disclosure requirements. If a requirement is not met, it is the client who will be liable to any related penalty. Clients are therefore advised to seek independent legal advice on the existence and interpretation of local disclosure requirements.
In the case of a discrepancy between the general information contained in this document and the information provided by CFCL for a specific market, as applicable (irrespective of whether this information has been obtained from an agent of Clearstream Fund Centre, or, as the case may be, a foreign regulator of a branch of CFCL), the information provided by CFCL for the specific market as applicable, shall prevail.
N.B.: In all countries, if it is suspected that a disclosure obligation has been breached (for example, that a threshold of holdings under custody has been crossed without being reported), the regulators and the authorities may have the power to investigate. Moreover, in all countries, disclosure obligations might be triggered by enforceable judgements of the competent jurisdiction of the country in question.
Disclosure categories
Clearstream Fund Centre classifies disclosure scenarios according to the following market categories:
Markets where disclosure by Clearstream Fund Centre to issuers, investment fund managers and/or to regulators or market authorities is mandatory under applicable law.
Markets where disclosure by Clearstream Fund Centre of account holders to issuers, investment fund managers and/or foreign regulators or market authorities is a legal obligation in respect of securities in specific circumstances.
Markets where there is no obligation for Clearstream Banking as custodian of Clearstream Fund Centre to disclose account holders to issuers, investment fund managers and/or regulators, notwithstanding any disclosure requirement falling directly on clients of Clearstream Fund Centre, shareholders and/or beneficial owners or notwithstanding disclosure necessary to obey an enforceable judgement of the country in question.
Disclosure requirements – Register Market – U.S.A.
Disclosure Category: 2
Clearstream Fund Centre S.A. (“CFCL”) may be required to disclose the identity and holdings of clients and ultimate beneficial owners, upon request, in the case of holding of securities in U.S. investment funds.
Consent
In order to comply with the local legislation, clients with holdings in U.S. investment funds or entering into transactions in the U.S. market must consent and are hereby deemed to consent to the required legal disclosure. Such consent includes the appointment of the requestor (for example, the Fund Manager, Transfer Agent, Regulator) as their attorney-in-fact, under power of attorney, to collect from CFCL the required information to be disclosed. Clients who do not grant such authority cannot hold such investment funds or financial instruments in their accounts with CFCL.
Disclosure Requirement
Clients are advised that the local laws and regulations oblige CFCL to disclose the requested information on CFCL clients and/or ultimate beneficial owners to the party that is entitled by law to receive such information.
Under U.S. law, registered investment funds will be required to disclose details of concerning investors to the Securities and Exchange Commission (SEC). At the same time, an Investment Fund is subject to disclosure for purposes of providing related services or for internal marketing or cross-selling.
Disclosure requirements – CSD Market – U.S.A
Disclosure Category: 2
An obligation may fall on Clearstream Fund Centre S.A. (“CFCL”), as a custodian, to disclose details of its account holders to issuers and/or to regulators on request in certain specific circumstances.
Consent
Clients holding U.S. funds and/or U.S. securities consent and are hereby deemed to consent to disclosure and to the appointment of the requestor as their attorney-in-fact, under power of attorney to collect such information from Clearstream Fund Centre as is required to be disclosed. Clients who do not want to grant such authority should refrain from holding such securities in their account with Clearstream Fund Centre.
Disclosure requirements
Investment funds and equities
U.S. regulations allow the issuer(s) and/or fund manager(s) to get information about the investors, the investors identity and their holdings.
Background and legal basis
Such disclosure requests are possible subject to the company having issued the securities which have opted for such disclosure request in its by-laws.
Investment funds
Request from fund manager(s), based on rule 22C-2 from the Securities Exchange Commission (“SEC”): The funds are entitled to obtain beneficial owner information at all times. Clearstream Banking's depository, based on the input received from Clearstream Fund Centre, will submits the required information on behalf of Clearstream Fund Centre to the funds.
Equities
Request from issuer(s), based on rule 14C-2 from the SEC: The disclosure request on equities is initiated by the issuer and, subsequently, Clearstream Banking's depository will submit the relevant information to the issuer based on the input received from Clearstream Banking's client. The shareholder can elect to object to such a disclosure request and accordingly Clearstream Banking will reply to such request on a case by case basis subject to specific prior client consent.
Sanctions
Investment funds
In cases of non-disclosure, there is a risk of fees to Clearstream Fund Centre that will then be passed on to its clients.
Funds can instruct the financial intermediary (that is, Clearstream Fund Centre's custodian) to restrict or prohibit further transactions on the fund shares for a specific shareholder who has been identified by the funds as having engaged in transactions of fund shares (directly or indirectly through the intermediary's account) that violate policies established by the funds for the purpose of eliminating or reducing any dilution of the value of the outstanding securities issued by the funds.
Equities
No specific information is available on the following risks:
- The risk incurred in cases of non-compliance by shareholders/investors;
- The risk incurred in cases of non-compliance with the obligation to report threshold crossings. Please refer to the Securities Exchange Act 1934.
Obligation to report threshold crossings
Equities
All investors, resident or non-resident, who acquire a 5% or greater share of one class of an equity issue must disclose the specifics of the transaction directly to the SEC within 10 calendars days upon acquisition (Rule 13D of the Securities Exchange Act 1934). No intermediation from Clearstream Fund Centre is required.
Every investment manager that exercises investment discretion with respect to account holding Section 13(F) securities, as defined in Rule 13, having an aggregate fair market value on the last trading day of any month of any calendar day of at least USD 100 million shall file a report on form 13F with the SEC within 45 calendar days after the last day of such calendar year and within 45 calendar days after the last day of each of the first three calendar quarters of the subsequent calendar year (Rule 13F-1 of the Securities Exchange Act 1934). No intermediation from Clearstream Fund Centre is required.
Disclosure Category: 3
Clearstream Fund Centre, as intermediary, has no obligation to disclose the holdings or other information about its clients.
Consent
With the exception of foreign official organisations and the Federal Reserve Banks, the Treasury's large position record-keeping and reporting rules apply to all entities, foreign and domestic, that may control a reportable position in a recently issued Treasury security. This includes but is not limited to government securities brokers and dealers; registered investment companies; registered investment advisers; custodians, including depository institutions, that exercise investment discretion; hedge funds; pension funds; insurance companies; foreign banks; and foreign affiliates of U.S. entities.
Custodians are not required to report on such positions if they do not have the authority to exercise control (that is, investment discretion) over the purchase, sale, retention or financing of specific Treasury securities.
Under the Treasury's large position rules, neither a custodian nor an executing broker-dealer is obligated to inform its clients of these record-keeping and reporting requirements.
The Government Securities Act Amendments of 1993 specifically provide that the Treasury will not be compelled to disclose publicly any information required to be kept or reported. In particular such information is exempt from disclosure under the Freedom of Information Act.
Disclosure requirements
U.S. Treasury's large position record-keeping and reporting rules
Large position reports must be received by the Federal Reserve Bank of New York before 12:00 noon Eastern time on the fourth business day after the issuance of the Treasury press release calling for large position information. The actual date on which reports are due will be provided in the press release, subsequently, Clearstream Fund Centre will submit the relevant information to the issuer based on the input received from Clearstream Fund Centre’s client.
Large position reports must be filed with the Government Securities Dealer Statistics Unit of the Federal Reserve Bank of New York. Further details on completing the reporting requirement can be found on the TreasuryDirect website.
Background and legal basis
Under the Government Securities Act Amendments of 1993, the U.S. Treasury may call for Large Position Reports from those entities whose reportable position in a given Treasury security exceeds a certain threshold.
Treasury will provide notice requesting large position reports by issuing a press release and subsequently publishing a notice in the Federal Register.
Please refer to Disclosure Requirements – U.S.A. for more information.
Disclaimer
The information contained in the Holding Restrictions is based on the legal opinion obtained by CBL that was issued on 27 February 2019. CFCL believes the information to be correct as of that date but disclaims any responsibility as to the accuracy and completeness of the information after that date. In the case of discrepancy between the information provided by CFCL and the local laws and regulations, the latter shall prevail. The Holding Restrictions do not constitute legal advice and clients should seek advice from independent professional counsel.
Clients are responsible for ensuring compliance with the disclosure requirements and agree to indemnify and hold harmless CFCL for any loss, expense, liability, damage or claims, whether direct or indirect, against or incurred by CFCL arising out of or resulting from such non-compliance.