101700 – Financial Accounts: Equity or Debt Interest in an Investment Entity

Equity and debt interests are financial accounts if they are interests in an investment entity.

Where an entity is an investment entity solely because it acts on behalf of a customer by investing, managing or administering Financial Assets in the name of the customer, the debt and equity interest in the investment entity are not Financial Assets provided it renders only investment advice to, or manages portfolios for, the customer.

An equity interest may vary depending on the nature of the investment entity. In the case of an investment entity that is a partnership, an equity interest is either a capital or profits interest in the partnership.

In the case of a trust, an equity interest is any interest held by a person who is treated as a settlor or beneficiary of all or any part of the trust, or any other natural person exercising ultimate effective control over the trust.

  • A Reportable Person will be treated as being a beneficiary of a trust if such a person has the right to receive a mandatory distribution from the trust. This distribution can be received either directly or indirectly, for example through a nominee; or
  • Receives a discretionary payment from the trust. Again this receipt can be either directly or indirectly from the trust.