The SEC Pulse

Form BE-12 – Affirmative BEA Reporting Obligation for Foreign Owned Entities

Posted by Will Hanson on April 20, 2018 at 4:45 PM

By Will Hanson and Sam Bombaugh


The Bureau of Economic Analysis (the “BEA”) is a branch of the U.S. Department of Commerce that collects statistical information about the American economy. One function of the BEA is to record statistics for all foreign direct investment in the United States, as authorized by the International Investment and Trade in Services Survey Act. 

Ongoing Reporting Obligation          

The BEA requires U.S. business enterprises to report foreign direct investment in the United States on Form BE-13. As a general rule, Form BE-13 must be filed by any U.S. business enterprise within 45 days after:

(i)  the acquisition by a foreign parent of at least a 10% direct or indirect voting interest in such U.S. business enterprise;

(ii)  the establishment of such U.S. business enterprise by a foreign parent with at least a 10% direct or indirect voting interest therein; or

(iii)  an expansion of a foreign parent’s business in the United States (each, a “Reportable Event”).

If a Reportable Event in which a foreign parent invests less than $3 million in the United States occurs, the affected U.S. business enterprise may file a Form BE-13 Claim for Exemption. No filing is required upon the occurrence of a Reportable Event if there is no foreign parent who holds at least a 10% direct or indirect voting interest in the U.S. business enterprise.

Periodic Reporting Obligations

In addition to the ongoing reporting obligations imposed by the BEA, U.S. business enterprises in which a foreign parent holds at least a 10% direct or indirect voting interest may be required to file quarterly reports on Form BE-605 or annual reports on Form BE-15 in order to update their earlier filings. Fortunately, no U.S. business enterprises have quarterly or annual BEA filing obligations unless they are specifically requested by the BEA.

Finally, the BEA also conducts a five-year benchmark survey of all foreign direct investment in the United States. Unlike the BEA’s quarterly and annual surveys, each U.S. business enterprise in which at least a 10% voting interest could be traced to a foreign parent at the end of fiscal year 2017, regardless of whether such entity was contacted by the BEA, has an affirmative obligation to complete and file the benchmark survey on Form BE-12. 

Form BE-12

Filing Deadline

Form BE-12 must be filed with the BEA by May 31, 2018, however the filing deadline is automatically extended to June 30, 2018 for respondents who use the BEA’s eFile system.


Similar to the ongoing Form BE-13 filing obligations, any U.S. business entity in which a foreign parent owned at least a 10% voting interest (directly or indirectly) at the end of fiscal year 2017 must file Form BE-12. 

The BEA only tracks the control of a U.S. business enterprise by a foreign parent, not in a foreign parent’s beneficial interest therein. In determining voting interest, the BEA deems that (i) voting interest in a corporation is apportioned based on voting securities; (ii) voting interest in a limited liability company is apportioned based on membership interests; and (iii) voting interest in a partnership is apportioned 100% with the General Partner unless the Partnership Agreement specifically gives voting control to the Limited Partners. 

A private fund is exempt from reporting as long as (i) it does not own, directly or indirectly through another business enterprise, an operating company in which a foreign parent owns at least 10% of the voting interest therein, and (ii) if the foreign parent owns a private fund indirectly (through one or more other U.S. business enterprises), there are no U.S. operating companies between the foreign parent and the indirectly-owned private fund.

Form BE-12 must be filed on a consolidated basis by the highest U.S. affiliate of a foreign parent that cannot be consolidated into another U.S. affiliate of such foreign parent.  Each U.S. business enterprise will need to file a different Form BE-12 based on its size and ownership structure. The most basic Form BE-12C may be filed by any U.S. business enterprise that is an affiliate of a foreign parent and has total assets, sales or gross operating revenues, or net income of $60 million or less. The more in-depth Form BE-12B must be filed by affiliates of foreign parents with total assets, sales or gross operating revenues, or net income between $60 million and $300 million, and the most burdensome Form BE-12A must be filed by U.S. business enterprises that are majority owned by foreign parents and which have total assets, sales or gross operating revenues, or net income of more than $300 million.

A Form BE-12 Claim for Not Filing may only be filed by a U.S. business enterprise who is asked by the BEA to file Form BE-12 but who is not at least 10% directly or indirectly owned by a foreign parent, or who is otherwise not subject to Form BE-12 filing requirements. Unlike with respect to Form BE-13, there is no de minimis $3 million investment below which an exemption from filing may be claimed.


Any failure to report shall be subject to a civil penalty of not less than $4,527 and not more than $45,268, and to injunctive relief commanding such person to comply, or both. Whoever willfully fails to report shall be fined not more than $10,000 and, if an individual, may be imprisoned for not more than one year, or both. Any officer, director, employee, or agent of any corporation who knowingly participates in such violations, upon conviction, may be punished by a like fine, imprisonment or both.


Survey data collected by the BEA is confidential and may only be used for statistical and analytical purposes, and the BEA is prohibited from granting other agencies access to its data for tax, investigative, or other regulatory purposes. Statistical data reported on Form BE-12 is not subject to Freedom of Information Act requests.

For more information on Form BE-12 or other BEA reporting obligations, please visit the BEA’s website at

Topics: Form BE-12, Department of Commerce, BEA, foreign entity

SEC issues guidance on cybersecurity disclosures

Posted by Howard Berkenblit on February 21, 2018 at 3:07 PM

The SEC posted today an interpretive release regarding its latest guidance public companies’ disclosure obligations under existing law with respect to matters involving cybersecurity risk and incidents. It also addresses the importance of cybersecurity policies and procedures and the application of disclosure controls and procedures, insider trading prohibitions, and Regulation FD and selective disclosure prohibitions in the cybersecurity context.

The timing of the release was a bit unusual. Initially, the SEC was scheduled to consider the guidance at an open meeting on February 21st. It abruptly cancelled the meeting and instead put out a press release saying the interpretive guidance had been approved on February 20th. Sounds like the SEC may be having its own issues with disclosure controls and procedures!

Topics: cybersecurity, SEC, Securities and Exchange Commission, Regulation FD

NYSE Rule Change: Material News at End of the Day

Posted by Howard Berkenblit on December 6, 2017 at 11:11 AM

The SEC has approved a NYSE rule that will prohibit listed companies from issuing material news after the official closing time of trading until at least 5 minutes after closing (unless the company’s official closing price is published sooner).

Topics: SEC, New York Stock Exchange, NYSE, Securities and Exchange Commission

Simplification of Regulation S-K - Proposed Rules

Posted by Jeffrey Morlend on October 12, 2017 at 3:59 PM

The SEC has proposed a series of amendments to modernize and simplify disclosure requirements for public companies, investment advisers and investment companies, particularly those disclosure requirements under Regulation S-K. Such amendments include proposed changes to, among others, Item 102 (Description of Property), Item 303 (Management’s Discussion and Analysis), Item 401 (Directors, Executive Officers, Promoters, and Control Persons), Item 405 (Compliance with Section 16(a) of the Exchange Act), Item 501(b) (Outside Front Cover Page of the Prospectus), Item 503(c) (Risk Factors), Item 508 (Plan of Distribution), Item 601(b)(10) (Material Contracts) and various rules related to incorporation by reference. 

Among the most impactful proposed changes are:

  1. Limiting the period-to-period comparison required by Item 303 (Management’s Discussion and Analysis) to only the two most recent fiscal years rather than the currently required three most recent fiscal years. The comparison to the third fiscal year would still be required if material to the understanding of the company’s financial statements and if not included in the company’s Form 10-K for the previous year.
  1. Limiting the disclosure required by Item 102 (Description of Property) to only those properties that are material.
  1. With respect to exhibits to SEC filings (Item 601):

 - Allowing companies to omit schedules that don't contain material information from all 
   exhibits, rather than only from acquisition agreements.

- Eliminating the requirement (other than for newly reporting companies) under Item
  601(b)(10) to file as exhibits material contracts that were entered into less than two
  years before that filing but that have been fully performed at the time of the filing.

- Permitting companies to omit or redact from material agreements filed as exhibits to
  SEC filings confidential information that is not material and would cause competitive
  harm if made public, without requiring companies to first file a confidential treatment
  request. Companies would be required to mark their filings to indicate omitted items.

  1. Permitting companies to omit disclosure about Section 16 reports if all reports have been timely filed (and eliminating the box on the cover of Form 10-Ks regarding Section 16 disclosure).

In contrast, the proposals would add a few requirements regarding descriptions of securities and XBRL tagging of cover pages, among others.

In addition, the proposals would eliminate certain other outdated disclosure requirements and make various conforming updates to forms and rules with outdated references.

The proposals, which can be found here, are subject to a public comment period, following which time, the SEC will further consider whether or not to approve them as final rules.

Insider Trading and Equifax

Posted by Howard Berkenblit on October 2, 2017 at 5:00 PM

We regularly have conversations with our clients about whether particular non-public information is "material," who at the company knows about such information and whether certain individuals should be allowed to engage in securities transactions while such information remains non-public. Very often these conversations revolve around who knows what and when, how developed the facts are, etc. As a rule of thumb we advise clients to think about how things would look in hindsight if they came to light in a front page story on the cover of the Wall Street Journal.

Well, the General Counsel of Equifax is dealing with exactly that situation (see article from today's cover of The Wall Street Journal).  As outsiders, we don’t know what exactly the general counsel (or outside counsel if they were involved) said to the insiders whose trades are being investigated, what the insiders knew or for that matter what the GC knew. We don’t know how Equifax’s insider trading policy operated in practice. All we currently know is that trades were made after the cyber-breach was known to at least some individuals – and that doesn’t look so good on the cover of the Wall Street Journal.  Whether and how this will make our advice and our clients’ actions regarding allowing trades, time will tell, but it’s a good reminder that the conversations around these topics are not just theoretical.

Topics: Equifax

SEC fees to increase on October 1st

Posted by Howard Berkenblit on August 25, 2017 at 2:44 PM

Yesterday, the SEC announced that in fiscal year 2018 the fees that public companies and other issuers pay to register their securities with the Commission will be set at $124.50 per million dollars. This is an increase from the current rate of $115.90/million. The new higher rate goes into effect on October 1, 2017.

Topics: public companies, U.S. Securities Laws

Confidential IPO Filing System to be Expanded

Posted by Howard Berkenblit on June 30, 2017 at 10:29 AM

GettyImages-506172508.jpgAs of July 10th, the SEC’s Division of Corporation Finance will permit all companies to submit draft registration statements relating to initial public offerings for review on a non-public basis. Previously, this process was only available for “emerging growth companies” under the JOBS Act, although that covered a substantial majority of IPO candidates. 

More notably, this process will now be available for most offerings made in the first year after a company has entered the public reporting system. 

More information can be found at:

Topics: Jobs Act, SEC, Division of Corporation Finance

Auditor Reports to Require Additional Information

Posted by Howard Berkenblit on June 2, 2017 at 11:00 AM

GettyImages-182188675.jpgThe Public Company Accounting Oversight Board has approved a new standard (though still subject to SEC approval) designed to enhance the relevance and usefulness of the Auditor's Report with additional information for investors.

The new standard and related amendments require auditors to include in the auditor's report a discussion of the critical audit matters (CAMs), which are matters that have been communicated to the audit committee, are related to accounts or disclosures that are material to the financial statements, and involved especially challenging, subjective, or complex auditor judgment. Under the new standard, the auditor's report will disclose, among other things, the tenure of an auditor, specifically, the year in which the auditor began serving consecutively as the company's auditor. It also will include the phrase, "whether due to error or fraud," in describing the auditor's responsibility under PCAOB standards to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements.

If approved by the SEC, the new auditor's report format, tenure, and other information would be effective for audits for fiscal years ending on or after December 15, 2017. The communication of CAMs for audits of large accelerated filers would be effective for audits for fiscal years ending on or after June 30, 2019 and the communication of CAMs for audits of all other companies would be effective for audits for fiscal years ending on or after December 15, 2020.

Communication of CAMs is not required for audits of emerging growth companies, brokers and dealers, investment companies other than business development companies, and employee stock purchase, savings and similar plans.

A fact sheet on the new rules also is available:

Topics: SEC, fraud, audit committee, Public Company Accounting Oversight Board, Critical Audit Matters

Sullivan & Worcester Advises Select Income REIT in Offering of $350 Million of Unsecured Notes

Posted by Leah Schloss on May 16, 2017 at 8:55 AM

An S&W team represented Select Income REIT (Nasdaq: SIR) in its underwritten public offering of $350 million of 4.25% senior unsecured notes due May 15, 2024. SIR expects to use the net proceeds from this offering to repay amounts outstanding under its revolving credit facility and for general business purposes.

The offering press release can be viewed here.

The S&W team included Benjamin Armour, Howard Berkenblit and William Curry.

Sullivan & Worcester is a leading corporate law firm advising clients ranging from Fortune 500 companies to emerging businesses. With more than 175 lawyers in Boston, London, New York and Washington, D.C., the firm offers services in a wide range of areas, including corporate finance, banking, trade finance, securities and mutual funds, litigation, mergers and acquisitions, intellectual property, tax, real estate and REITs, private equity and venture capital, bankruptcy, environment and natural resources, climate change, renewable energy and water resources, regulatory law, and employment and benefits. For more information please visit


Leah Schloss

Topics: SEC, NASDAQ, offering

SEC Announces New Changes to Covers of Periodic Reports and Registration Statements

Posted by Howard Berkenblit on April 4, 2017 at 12:54 PM

The SEC adopted technical rule and form SEC graphic.jpgamendments ( under the JOBS Act that impact almost every periodic report and registration statement by adding an additional “check the box” item on the covers (as well as the introductory language prior to such item.

Specifically, in the section where companies check off what type of issuer they are, there is now a new box for emerging growth company (“EGCs” - they will also still check the other relevant box for accelerated filer, smaller reporting company, etc.). In addition, to provide a uniform way to identify if EGCs have elected to take advantage of JOBS Act rules permitting them to defer adoption of accounting standards, the covers will also include an additional check the box item regarding such election. An example is below.

These rules go into effect as soon as they are published in the Federal Register, which should be in the next few days – in other words, for upcoming 10-Qs for the quarter ended March 31, 2017, companies will need to reflect this change (if not sooner for other reports). The forms impacted include, among others:  S-1, F-1, S-3, F-3, S-4, S-8, S-11, 20-F, 8-K (note this was not previously on the 8-K cover at all), 10-K, 10-Q – see the end of the rule release linked above for the forms and formats.


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer 􀀀
Accelerated filer 􀀀
Non-accelerated filer 􀀀 (Do not check if a smaller reporting company)
Smaller reporting company 􀀀
Emerging growth company 􀀀

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Inflation Changes for EGCS and Crowdfunding Amounts:

The JOBS Act requires the SEC to revisit certain definitions that contain dollar amounts to index them for inflation every 5 years. These include the $1 billion revenue threshold in the EGC definition, as well as certain limits in Regulation Crowdfunding on the dollar amount raised and invested. As a result the technical rule amendments have now raised each of these amounts slightly. For example, to qualify as an EGC, an issuer’s revenues must now be less than $1,070,000,000 and the maximum amount of crowdfunding in any 12 month period cannot now exceed $1,070,000 (increased from $1 million). With respect to the EGC definition, many issuers describe this definition in their registration statements or periodic reports and should be mindful to make the updates to such description.

Other Changes:

The technical amendments also update various rules in Regulation S-K and S-X (in areas such as required financial statements, MD&A, executive compensation and others) to include references to various JOBS Act provisions that benefit EGCs. These are not new rules, but make it more convenient when checking the rules for particular filings to see what applies (or more likely does not apply) to EGCs by directly including instructions within the applicable rule provisions.

Topics: SEC, reporting requirements, Compliance Rules, Filing Rules

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The SEC Pulse provides updates and commentary from our Capital Markets Group on issues affecting publicly traded and privately owned businesses, investment banks and foreign companies who trade or raise capital in the United States, and boards of directors and company officers in securities transactions and corporate governance matters. 

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