Jan 28, 2024 On December 5, 2023 the National Futures Association (“NFA”) sent out a notice to members advisory regarding the Corporate Transparency Act. This advisory described the new effective date and obligations of the Financial Crimes Enforcement Network (“FINCEN”) beneficial ownership reporting rules. NFA further described how the new rules might impact member firms and particularly CFTC registrants. The Corporate Transparency Act will impact most businesses operating within the United States in 2024. The rest of this article will cover what this may mean for your regulated brokerage or trading business. What Is the Corporate Transparency Act? The Corporate Transparency Act, is a key component of the Anti-Money Laundering Act (“AMLA”) which was put in place January 1st of 2021. This act of Congress mandates the FINCEN create a national registry detailing beneficial ownership details of nearly all businesses operating within the United States. The act is anticipated to impact more than thirty-eight million companies and has very limited exemptions with respect to who must provide the government with ownership and control information. The Corporate Transparency Act is arguably the most sweeping change to beneficial ownership and control reporting in US history. It no doubt will bring about a historic shift in transparency as well as the national AML landscape. How did we get here? On October 26, 1970, the Bank Secrecy Act (BSA) also known as the Currency and Foreign Transactions Reporting Act, became a U.S. law requiring financial institutions to assist U.S. government agencies in detecting and preventing money laundering. Over the years it has been amended by the USA PATRIOT ACT of 2001 and other similar legislation including the Anti-Money Laundering Act of 2020 which lead to the Corporate Transparency Act of 2021 and now FINCENs publication of Beneficial Ownership Information Reporting Requirements that officially went into place January 1, 2024. The Corporate Transparency Act was implemented by the Biden administration to combat the use of shell corporations and other entities to facilitate money laundering and other illicit activities. This Act requires “Reporting Companies” to provide certain identifying information about their beneficial owners to the Treasury Department via FINCEN. How does this apply to me? According to NFA’s December 5, 2023 email most CFTC registered NFA member firms will be considered exempt from reporting. The reason for this is that ownership and control information for registered firms is already required to be supplied in a federal database via the registration process. It appears based on NFA’s assessment that FCMs, IBs, CTAs, and CPO’s will not have to file any new information with the government. Unfortunately, this does not apply to CPO’s managing active commodity pools. For firms that have unregulated legal entities affiliated with regulated businesses please be mindful that those companies MAY NOT be exempt from reporting obligations. If you own or control entities which are not CFTC registered or NFA member firms it is important to conduct your own due diligence on the specific reporting obligations which may apply to your firm. Please see the excerpt below taken directly from NFA’s email to all member firms: FinCEN’s final rule implements the Corporate Transparency Act‘s (Act) beneficial ownership reporting provisions. Under the Act, CFTC-registered entities are exempt from the reporting requirement. However, a pooled investment vehicle (PIV), such as a commodity pool, will be required to comply with FinCEN’s reporting rule unless it qualifies for another exemption under the Act. Importantly, the Act exempts from the BOI reporting requirement any PIV operated or advised by an SEC-registered broker dealer (BD) or investment advisor (IA). As a result, a commodity pool operated or advised by an SEC-registered BD or IA is exempt from the reporting requirement. However, NFA Member commodity pool operators (CPO) which operate a commodity pool that does not qualify for an exemption under the Act will be required to report BOI to FinCEN for any commodity pools they operate in accordance with the following deadlines. 1. For a commodity pool created or registered to do business before January 1, 2024, a CPO must file a BOI report with FinCEN by January 1, 2025. 2. For a commodity pool created or registered on or after January 1, 2024, a CPO must file a BOI report with FinCEN within 90 days from the time the CPO receives actual notice that the commodity pool’s creation or registration is effective. In addition, for any commodity pool created or registered on or after January 1, 2024, a CPO will need to report the commodity pool’s company A company applicant is the individual who directly files the document that creates or registers the company. What’s Next for CPO’s? If your registered commodity pool operator is managing a listed company pool you will have to report to FINCEN beneficial owner and control information before the reporting deadline at the end of 2024. To learn more about how to report beneficial owner information to FINCEN a small entity compliance guide was created. This guide explains exempt firm obligations as well as how to file the appropriate paperwork for your fund. The following flow chart is provided in FINCEN’s Small Entity Compliance Guide and may be the simplest way to understand if an entity is a “reporting company” or not. (image:https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf) As can be seen above, if an entity is a U.S. Corporation, a Limited Liability Company (LLC), or any other type of company created by the filing of a document with a secretary of state or similar office under the law of a State or Indian tribe, is it required to report. To file the BOI report, you must identify “beneficial owners” and be able to submit the following pieces of information for the respective individual(s): Last Name First Name Date of Birth Residential Address An identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of identification document A beneficial owner would be any individual meeting at least one of two criteria: having substantial control over the reporting company, or owning or controlling a minimum of 25 percent of the ownership interests in a reporting company. The BOI defines “substantial control” in four ways: The individual is a senior officer (the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, or any other officer who performs a similar function). The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company. The individual is an important decision-maker for the reporting company. The individual has any other form of substantial control over the reporting company as explained further in FinCEN’s Small Entity Compliance Guide (see Chapter 2.1, “What is substantial control?”). How to File and Where to Get Help? Once beneficial owners have been identified and the information listed above has been collected, follow the following link to E-File or to download a pdf version for submission. If you require assistance with your filing FINCEN has provided a Help and Resources page with filing instructions and a quick reference guide. Never in US history have so many businesses been required to file this information. It is important to evaluate your obligations independently and to ensure that your business is in compliance with the Corporate Transparency Act before December 31, 2024.