Corporate Transparency Act: What State-Registered Investment Advisors Need To Know

3 min read
December 11, 2023

Unless your firm is registered with the SEC, your business is likely subject to the Beneficial Ownership Information (BOI) reporting requirements under the Corporate Transparency Act. This post dives into key details and what you need to know as we head towards 2024 to ensure you’re compliant. 

Key Information:

  • Applicable to State-registered Investment Advisors. Unless you are registered with the SEC, your business is likely subject to the BOI reporting requirements under the Corporate Transparency Act.
  • Those with entities formed before January 1, 2024 will have 12 months (until Jan. 1, 2025) to file their beneficial ownership information filing with FinCEN. 
  • Entities formed on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days from their date of formation to file their initial report. After January 1, 2025 - the deadline goes to 30 days after the date of formation.
  • There will be a secure filing system on FinCEN’s website that will be used to administer these filings. This is currently being developed and will be available on or after Jan 1, 2024.

Overview of the Rule

The Corporate Transparency Act (CTA) was issued by the Financial Crimes Enforcement Network (FinCEN) under the Department of Treasury. CTA is a significant regulatory development focused on enhancing transparency in entity structures and ownership to combat money laundering, tax fraud, and other illicit activities.

The CTA requires corporations, limited liability companies, and other similar entities formed or registered to do business in the U.S. to report beneficial ownership information to (FinCEN). This includes the disclosure of key information regarding the entity and its beneficial owners:

The reporting company will have to report:

  1. Its legal name;
  2. Any trade names or “doing business as” (d/b/a) names;
  3. The current street address of its principal place of business;
  4. Its jurisdiction of formation or registration;
  5. Its Taxpayer Identification Number; and
  6. Whether it is filing an initial report or a correction or update to a prior report.

For each individual who is a beneficial owner, a reporting company will have to provide:

  1. The individual’s name;
  2. Date of birth;
  3. Residential address; and
  4. An identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of identification document;
    • An image of the identification document used to obtain the identifying number in item 4.

FinCEN’s Small Entity Compliance Guide includes a checklist to help identify the information required to be reported (see Chapter 4.1, “What information should I collect about my company, its beneficial owners, and its company applicants?”).

Who is a beneficial owner?
A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests. See FAQ D.1 through D.4 for more information on determining beneficial owners.

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Exemptions and Applicability to Investment Advisers

All investment advisers reading this are likely to meet the definition of a reporting company, thereby, subjecting your business to the requirements under this rule, unless exempt. This also includes those investment advisors whose entities are owned indirectly such as through trusts or other related companies.

There are 23 categories of business entities exempted from these reporting requirements. Exempted entities include public companies, registered broker-dealers, certain investment companies, banks, credit unions, and 501(c) tax-exempt entities. If you are exempt from the requirements under this rule no action is required.

The exemption for investment advisors under this rule only applies to those who are registered with the Securities & Exchange Commission (SEC).

All State-registered Investment Advisors are subject to the requirements, unless your business qualifies for another exemption.

Filing Process & Deadlines 

Business entities formed or registered on or after January 1, 2024, will have 90 days from the date of formation to report Beneficial Ownership Information (BOI), entity information, and “company applicant” information to FinCEN. 

For entities formed or registered prior to January 1, 2024 you will have 12 months to file your initial report. 

FinCEN is developing an online portal for these submissions, which will be the primary platform for filing.

Key Dates

  • January 1, 2024: Start date for new reporting requirements.
  • January 1, 2025: Deadline for initial reports from companies existing before January 1, 2024.

For state-registered investment advisers, it’s crucial to understand that while some overviews and summaries of the rule may simply list Investment Advisers as being exempt - the rule itself and FinCENs guide for determining applicability both expressly state that the exemption related to investment advisers applies to those who are registered with the Securities & Exchange Commission. 

Therefore, absent another qualifying exemption, most state-registered RIAs do not qualify for the exemption and must adhere to these reporting requirements. 

Since the online portal for filing is not yet available, entities should keep abreast of FinCEN updates and ensure compliance by the specified dates.

I highly recommend reviewing the key resources linked below and encourage you to review their FAQ’s if you have any outstanding questions.

Key Resources:
BOI Reporting Main Resource on FinCEN
FinCEN Introduction to BOI Reporting
FAQ for Beneficial Ownership Information Reporting Rule 

Interested in more important updates like these? Stay tuned for our new program launching on Youtube in mid-January, highlighting the compliance updates you need to know.

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About the Author

As Managing Director of XYPN Compliance, Travis Johnson, IACCP® leads the Compliance Team in the development and delivery of all of XYPN's compliance offerings and resources. Travis leverages his years of experience as a member of XYPN's Compliance Team, as well as prior experience building and running operations and compliance programs within RIAs to provide practical insights into the application of compliance rules, regulations, and industry best practices.

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