FIRRMA Expands CFIUS Oversight of Foreign Investor ATS Declarations

The recent Financial Industry Regulatory Authority (“FINRA”) announcement about federal enactment of a substantial piece of legislation that will likely delay close of some foreign direct investment (“FDI”) deals overseen by the Committee on Foreign Investment in the United States (“CFIUS”). The Act supports CFIUS regulatory response to the evolution in alternative trading system (“ATS”) transaction types. Under the new legislation, foreign investors will be responsible for filing mandatory “declarations” with description of transactions prior to close or transfer to an estate or trust; and payment of a filing fee of up to $300,000 per transaction.  


CIFIUS Oversight Expanded

Federal enactment of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) on August 13, 2018 expands the jurisdictional powers of CFIUS responsible for oversight of foreign direct investment (“FDI”) made by investors from abroad. FIRRMA establishes that ATS compliance with Securities and Exchange Commission (“SEC”) NMS Regulation, and Regulation SHO close out standards. The Act also stipulates ATS have the capability of identifying trading risks occurring in those systems to be compliant. Full implementation of the Act will come in effect after the adoption of near future ATS regulatory provisions required to impose compliance within the investment sector.


Domicile and Situs Rules

SEC recognition of ATS investment trades as situs (site) assets in accordance with federal Internal Revenue Service (“IRS”) defines such assets as “US-situs” for purposes of taxation. IRS situs guidelines apply to business Investment funds, brokerage accounts, life Insurance and annuities, money market funds, privately offered bond debt instruments, qualified retirement plans with U.S. employer sponsors, real estate, stocks issued by a U.S. corporation (including certificates held abroad), and tangible property.


Rules of domicile for non-citizen investors also apply to CFIUS oversight of financial and property assets. Tax treaties between a foreign country of domicile, residence, and/or citizenship and the United States, will determine if investor tax credit opportunities exist according to tier of investment. Enforceable transfer tax rules, domestic and foreign credits, and treaties may apply. Non-U.S. situs assets remain exempt from gift-tax.  


ATS Declaration and Your Estate

FINRA publication of Regulatory Notice 18-25 outlines implementation guidelines to evaluation of ATS supervision obligations. An attorney at law specializing in estate and trust preparation can advise a client about recent changes in regulatory rules for foreign investors. Ask your attorney about IRS rules to non-citizen estate planning (IRC (08-05-2016) Estate Tax Return Filing Requirements for Estates with International Issues).


Estate Law Firm NY

The most popular destination for foreign investors, New York allows for tax-free transfer of financial and real property assets to an estate or trust. Foreign investors seeking advice about estate and trust tax-exemption of assets can contact a licensed estate law attorney. Ettinger Law Firm is a licensed New York attorney practice with experience in international estate law planning and probate litigation. Contact Ettinger Law Firm for an estate planning consultation.


See Related Blog Posts

Asset Transfers from Trusts Abroad

The New Rules to International Estate Planning

Contact Information