REGULATORY CONSIDERATIONS SECURITIES REGISTRATION
CORPORATE TRANSPARENCY ACT (CTA) REPORTING REQUIREMENTS
The Corporate Transparency Act (CTA) of 2021 requires all “reporting companies” to report certain information to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to aid in combating money laundering other financial crimes, and international terrorism. The rule to implement that requirement took effect January 1, 2024. The information required for the company itself is: (1) the company’s legal name trade name or DBA; (2) its address; (3) the state or other jurisdiction in which it was formed or first registered, depending on whether it is a U.S. or foreign company; and (4) its Taxpayer Identification Number. The company will also need to provide information on each “beneficial owner” of the company— defined as any individual who owns or controls at least 25 percent of the company or who exercises substantial control over the company. That required information is: the individual’s (1) legal name; (2) date of birth; (3) address (in most cases a home address); and (4) an identifying number from a driver’s license, passport, or other approved document for each individual as well as an image of the document from which the image is taken. For companies created or registered after January 1, 2024 that same information is required for the “company applicants,” (1) the individual who directly files the document that creates or first registers the reporting company; and (2) the individual that is primarily responsible for directing or controlling the filing of the relevant document. There is no exemption from the status as a “reporting company” based on company size. The rule does exempt 23 categories of companies “for entities already generally subject to substantial federal or state regulation under which beneficial ownership may be known.” Those categories are SEC reporting issuers of stock; governmental entities; banks; credit unions; bank holding companies; money transmitting businesses; securities brokers or dealers; securities exchanges or clearing agencies; other SEC registered entities; investment companies and investment advisors; venture capital fund advisors; insurance companies; state licensed insurance providers; Commodity Exchange Act reporting entities; accounting firms; public utilities; pooled investment vehicles; tax exempt entities; entities assisting tax exempt entities; large operating companies (defined as a company with more than 20 full time employees, an operating presence in a physical office within the United States, and a filed Federal income tax or information return in the United States for the previous year demonstrating more than US $5 million in gross receipts or sales from US sources); subsidiaries of some exempt entities; inactive entities.
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