IEIM401100 - NRFI: FATCA Only: Restricted Funds

NRFI: FATCA Only: Restricted Funds

A restricted fund can be a Registered Deemed Compliant Financial Institution by virtue of the US regulations at §1471-5 (f)(1)(i)(D).

Investment Entities are eligible for restricted fund status where they impose prohibitions on the sale of units in the fund to Specified US Persons, Non-Participating Financial Institutions and Passive NFFEs with Controlling US Persons and where the fund meets the following requirements:

• The Financial Institution is a Financial Institution solely because it is an Investment Entity, and it is regulated as an investment fund in the UK and in all of the countries in which it is registered and in all of the countries in which it operates. A fund will be considered to be regulated as an investment fund for purposes of this paragraph if its manager is regulated with respect to the fund in all of the countries in which the investment fund is registered and in all of the countries in which the investment fund operates.

• Interests issued directly by the fund are redeemed by or transferred by the fund rather than sold by investors on any secondary market.

• Interests that are not issued directly by the fund are sold only through distributors that are Participating Financial Institutions, Registered Deemed Compliant Financial Institutions, non-registering local banks, or restricted distributors. A distributor includes an underwriter, broker, dealer, or other person who participates, pursuant to a contractual arrangement with the financial institution, in the distribution of securities and holds interests in the Financial Institution as a nominee.

• The Financial Institution ensures that by the later of 30 June 2014 or six months after the date it registers as a Deemed Compliant Financial Institution, that each agreement that governs the distribution of its debt or equity interests, prohibits sales and other transfers of debt or equity interests in the Financial Institution (other than interests that are both distributed by and held through a Participating Financial Institution) to Specified US Persons, Non-Participating Financial Institutions, or Passive NFFEs with one or more substantial US owners.

• In addition, by that date, the Financial Institution’s prospectus and all marketing materials must indicate that sales and other transfers of interests in the Financial Institution to Specified US Persons, non-Participating Financial Institutions, or Passive NFFEs with one or more substantial US owners are prohibited unless such interests are both distributed by, and held through, a Participating Financial Institution.

• The Financial Institution ensures that by the later of 30 June 2014, or six months after the date the Financial Institution registers as a Deemed Compliant Financial Institution, each agreement entered into by the Financial Institution that governs the distribution of its debt or equity interests requires the distributor to notify the Financial Institution of a change in the distributor’s Chapter 4 status within 90 days of the change.

• The Financial Institution must certify to HMRC with respect to any distributor that ceases to qualify as a distributor, the Financial Institution will terminate its distribution agreement with the distributor, or cause the distribution agreement to be terminated, within 90 days of notification of the distributor’s change in status and, with respect to all debt and equity interests of the Financial Institution issued through that distributor, will redeem those interests, convert those interests to direct holdings in the fund, or cause those interests to be transferred to another compliant distributor within six months of the distributor’s change in status.

• With respect to any of the Financial Institution’s pre-existing direct accounts that are held by the beneficial owner of the interest in the Financial Institution, the Financial Institution reviews those accounts in accordance with the procedures (and time frames) applicable to pre-existing accounts to identify any US account or account held by a Non-Participating Financial Institution. Notwithstanding the previous sentence, the Financial Institution will not be required to review the account of any individual investor that purchased its interest at a time when all of the Financial Institution’s distribution agreements and its prospectus contained an explicit prohibition of the issuance and/or sale of shares to US entities and US resident individuals. A Financial Institution will not be required to review the account of any investor that purchased its interest in bearer form until the time of payment, but at such time will be required to document the account.

• By the later of 30 June 2014, or six months after the date the Financial Institution registers as a Deemed Compliant Financial Institution, the Financial Institution will be required to certify to HMRC either that it did not identify any US account or account held by a Non-Participating Financial Institution as a result of its review or, if any such accounts were identified, that the Financial Institution will either redeem such accounts, transfer such accounts to an affiliate or other Financial Institution that is a Participating Financial Institution, Reporting Model 1 Financial Institution, or US Financial Institution.

• By the later of 30 June 2014 or the date that it registers as a Deemed Compliant Foreign Financial Institution, the Foreign Financial Institution implements the policies and procedures to ensure that it either:

1) does not open or maintain an account for, or make a withholdable payment to, any Specified US Person, Non-Participating Financial Institution, or Passive NFFE with one or more Controlling Persons who are citizen or resident in the US and, if it discovers any such accounts, closes all accounts for any such person within six months of the date that the Financial Institution had reason to know the Account Holder became such a person; or

2) reports on any account held by, or any withholdable payment made to, any Specified US Person, Non-Participating Financial Institution, or Passive NFFE with one or more Controlling Persons who are citizen or resident in the US to the extent and in the manner that would be required if the Financial Institution were a Participating Financial Institution.

For a Financial Institution that is part of a group of Related Entities, all other Financial Institutions in the group of Related Entities are Participating Financial Institutions, Registered Deemed Compliant Financial Institutions, sponsored Financial Institutions, non-reporting IGA Financial Institutions, or Exempt Beneficial Owners.