STATUTES & REGULATIONS

Frequently Asked Questions Relating to Treasury's Large Position Recordkeeping and Reporting Rules - SECTION 420.2 - DEFINITIONS

2.1) Recently-Issued

2.1.1) What is considered the most recent issue within the definition of "recently-issued?"

"Recently-issued" Treasury securities are defined in the rules and are determined by the frequency of the issue. For those securities that are issued on a quarterly or more frequent basis (i.e., bills and notes), the three most recent issues are considered “recently-issued.” For those securities that are issued less frequently than quarterly, the two most recent issues would be “recently-issued.”

For all Treasury securities, a when-issued security -- a security announced to be issued or auctioned but as yet unissued -- would be included in the definition of “recently-issued” and would be considered the most recent issue. A when-issued security is always the most recent issue.

Note: Treasury reserves the right to go outside of these timeframes when issuing a call for large position reports.

2.2) Reporting Entities, Aggregating Entities, Designated Filing Entities

2.2.1) When a reporting entity has the right to appoint a majority of the board of directors for an outside entity, but has not exercised the right, does the outside entity fall within the definition of an affiliate or aggregating entity of the reporting entity?

No, the outside entity does not fall within the definition of affiliate or aggregating entity simply because the reporting entity has the right to appoint a majority of its board of directors. The entity would fall within the definition of affiliate or aggregating entity when the reporting entity exercises its right and appoints a majority of the board of directors to the entity.

2.2.2)If the general partner of an aggregating entity personally invests in an outside entity, is that outside entity considered part of the aggregating entity for purposes of the rule?

Subject to other applicable restrictions contained in the rule, the outside entity would not be considered part of the aggregating entity unless the general partner owned more than 50% of the partnership and more than 50% of the outside entity.

2.2.3) If an aggregating entity is the sole general partner of an outside entity, is the outside entity an affiliate of the aggregating entity for purposes of the large position rules?

Yes, the outside entity is considered an affiliate of the aggregating entity under the large position rules. The definition of “affiliate” under the large position rules includes an “entity, a majority of whose board of directors or a majority of whose general partners are directors or officers of the aggregating entity...” (see section 420.2(i) of the large position rules). In cases where the aggregating entity is the sole general partner of an outside entity, the general partner constitutes the “majority” of general partners of the outside entity. Therefore, when a reporting entity calculates its reportable position to determine if it has reached the threshold announced in a call for large position reports, the reporting entity must include the reportable position of this type of outside entity (the aggregation is also required when an actual report is prepared and submitted). Moreover, the outside entity would be subject to the large position recordkeeping rules if, after the inclusion of the outside entity's reportable position, the reporting entity were subject to the recordkeeping rules.

If an outside entity that is an affiliate invests in another outside entity, the latter outside entity would become an affiliate only if it fell within the definition of affiliate under the large position rules. For example, if an outside entity that is an affiliate owns 40% of another outside entity, the 40%-owned outside entity would not become an affiliate unless the ownership interest increased to over 50% or unless the outside entity fell within some other part of the definition of affiliate under the large position rules. However, regardless of whether an outside entity is an affiliate, any portion of an outside entity's reportable position over which a reporting entity has investment discretion must be aggregated with the reportable position of that reporting entity. Further, records of an outside entity's transactions in Treasury securities must be maintained by a reporting entity if, after the inclusion of the outside entity's Treasury securities positions over which the reporting entity has investment discretion, the reporting entity were subject to the recordkeeping rules (i.e., if the inclusion of the outside entity's externally controlled position in Treasury securities caused the reporting entity to reach or exceed the recordkeeping threshold of $2 billion). This is the same treatment discussed in question 4.3 addressing the responsibility of the entity that has control of (i.e., investment discretion over) the Treasury securities to adhere to the recordkeeping requirements of the rules.

2.2.4) Can a designated filing entity submit separate large position reports for each aggregating entity within its reporting entity, or must it consolidate the report to be filed on behalf of the reporting entity?

A reporting entity must select one entity from its aggregating entities (i.e., the designated filing entity) as the entity designated to compile and file a consolidated report on behalf of the entire reporting entity. A designated filing entity is not required to be a distinct legal entity.

2.2.5) Can an individual be its own designated filing entity?

Yes, an individual can be her/his own designated filing entity. An individual can also be the designated filing entity of a reporting entity consisting of multiple entities.

2.2.6) Can an entity be a designated filing entity for two separate reporting entities?

No, each separate reporting entity must select one entity from among its own aggregating entities as the entity designated to compile and file a report on its behalf. This is designed to prevent the exchange of information related to transactions in Treasury securities between separate reporting entities.

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