U.S. Businesses that Have Sovereign Wealth Funds as Material Investors Cannot Borrow Under the Term Asset-Backed Securities Loan Facility

Posted on 07/31/2020


A question involving foreign investors is asked and disclosed in an updated Term Asset-Backed Securities Loan Facility FAQ by the Federal Reserve Bank of New York (FRBNY).

Is a U.S. business with a Material Investor that is a foreign government eligible to borrow under the TALF?
According to the July 27, 2020 updated FAQ, “No, a U.S. business with any Material Investor that is a foreign government is not eligible to borrow under the TALF. For this purpose, a sovereign wealth fund is considered a foreign government. In addition, in the case of an investment fund that borrows under the TALF, the investment manager of such an investment fund must not have any Material Investors that are foreign governments. A foreign government would not be considered a “Material Investor” of a pension plan established by such foreign government for the benefit of its employees, so long as such foreign government does not own, directly or indirectly, 10% or more of any outstanding class of securities of the plan or any investment manager of the plan.”

In the document, the Federal Reserve defines a “Material Investor” in this context as “an individual or entity that owns, directly or indirectly, 10 percent or more of any outstanding class of securities of an entity. In identifying such Material Investors, TALF Agents may use existing processes for identifying beneficial owners under the ownership prong of the customer due diligence requirements set forth in 31 CFR 1010.230 (such as, for example, risk-based reliance on information, forms and certifications provided by customers). In addition, borrowers and TALF Agents may rely on beneficial ownership information included in Schedule 13D and 13G filings pursuant to the reporting requirements under section 13 of the Securities Exchange Act of 1934 (Exchange Act) to identify beneficial owners which have acquired more than 5 percent of any class of a company’s shares.”

Keywords: Federal Reserve System.

Link: https://www.newyorkfed.org/medialibrary/media/markets/talfdocs/talf-faqs-marked-200727.pdf