03.08 – An Equity or Debt Interest in an Investment Entity

Where an Investment Entity is an asset manager, investment advisor or other similar entity, then their Debt and Equity Interests are excluded from being a Financial Account. This mirrors the treatment of Debt and Equity interests in entities that are solely Depository or Custodial Institutions.

Debt and Equity Interests (other than regularly traded interests) are only Financial Accounts in relation to those entities that are Investment Entities because:

  • the entity‘s gross income is attributable to investing, reinvesting or trading in financial assets, and they are managed by a Financial Institution including another Investment Entity, or
  • the entity functions or holds itself out as a Collective Investment Vehicle, mutual fund, exchange traded fund, private equity fund, hedge fund, venture capital fund, leveraged buyout fund, or any similar investment vehicle established with an investment strategy of investing, reinvesting or trading in financial assets.

In the case of a partnership that is a Financial Institution, the term Equity Interest means either a capital or profits interest in the partnership.

In the case of a Trust that is a Financial Institution, an Equity Interest means either an interest held by any person treated as a settlor or beneficiary of all or a portion of the Trust or any other natural person exercising ultimate effective control over the Trust.

A Specified US Person shall be treated as being a beneficiary of a Trust if such person has:

  • the right to receive a mandatory distribution (either directly or indirectly) from the Trust; or
  • receives a discretionary distribution (either directly or indirectly) from the Trust.