Impact of Corporate Transparency Act on Broker-Dealers and Investment Advisers

While state registered investment advisers are subject to the Corporate Transparency Act (“CTA” or “Act”) based on your organizational structure, it will also have a significant impact on the reporting and recordkeeping obligations of those companies affiliated with broker-dealers and investment advisers registered with the Securities and Exchange Commission (“SEC”).


The final rule issued by the Financial Crimes Enforcement Network (‘FinCEN”) became effective on January 1, 2024, and was originally enacted as a part of the Anti-Money Laundering Act of 2020. The Act is intended to enhance the ability of FinCEN and other agencies to protect U.S. national security and the U.S. financial system from illicit use and provide essential information to help prevent drug traffickers, fraudsters, corrupt actors such as oligarchs, and proliferators from laundering or hiding money and other assets in the United States. To obtain that goal, it has laid the foundation for the reporting of beneficial ownership information (“BOI”) for an estimated 32.6 million plus business entities operating in the United States.

Significant Definitions


Reporting Companies

The Act identifies two types of reporting companies, domestic and foreign. With respect to our discussion here, we will focus on the first category, the domestic reporting company. Domestic entities include corporations, limited liability companies, or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe (collectively a “reporting company” or “reporting companies”). Other types of legal entities, including certain trusts, are excluded from the definitions to the extent that they are not created by the filing of a document with a secretary of state or similar office.

Exempt Entities

The CTA includes a list of 23 categories of exempt entities, including an exemption for large operating companies, broker-dealers and investment advisers registered with the SEC, and other activities requiring SEC registration or federal oversight. Additionally, the list includes banks, venture capital fund advisors, public utilities, pooled investment vehicles, tax exempt entities, and inactive businesses.

It is important to note that while SEC registered broker-dealers and investment advisers are exempt for the definition of reporting companies, the holding companies owning those entities, and their affiliates and subsidiaries are in all likelihood, not exempt, depending on their respective businesses. Finally, it is also important to note that state registered investment advisers and finders are also not exempt, and as such they are also reporting companies.

Beneficial Ownership

The rule describes who must file a BOI report, what information must be reported, and when a report is due. Specifically, the rule requires reporting companies to file reports with FinCEN that identify among other things, the beneficial owners of the entity. However, the definition of beneficial owners goes beyond actual ownership in excess of 25%, aa it also includes the concept of substantial control.

In defining who has substantial control, the rule sets forth a range of activities that could constitute substantial control of a reporting company, and captures anyone who is able to make important decisions on behalf of the entity. Thus, the list of persons who fall under the definition of beneficial owner include senior officers of a reporting company, individuals who have authority over the appointment or removal of any senior officer, or a majority of the board of directors (or similar body), or who directs, determines, or has substantial influence over important decisions made by the reporting company, or has any other form of substantial control over the reporting company.

Beneficial Ownership Information Reports



BOI reports filed with FinCEN must be filed in the form and manner prescribed by FinCEN. That includes the submission on the Beneficial Ownership Secure System (“BOSS”) of all the required information on the reporting company, the required information for every beneficial owner, and a certification that the report or application is true, correct and complete.

The information required for the reporting company includes identifying information for the entity, and four pieces of information about each of its beneficial owners, to wit, name, birthdate, address, and a unique identifying number and issuing jurisdiction from an acceptable identification document (and the image of such document).

Filing Requirements

Reporting companies created or registered before January 1, 2024, will have one year (until January 1, 2025) to file their initial reports. Reporting companies created or registered after January 1, 2024, but prior to December 31, 2024, will have 90 days after receiving notice of their creation or registration to file their initial reports. Finally, reporting companies created or registered after January 1, 2025, will have 30 days after receiving notice of their creation or registration to file their initial reports.

Additionally, BOI Reports must be updated within 30 days in the event any of the information in the previous BOI Reports have changed, and reporting companies must correct inaccurate information in previously filed reports within 30 days of when the reporting company becomes aware or has reason to know of the inaccuracy of information in earlier reports.


Failure to comply with the CTA can result in a $500-per-day penalty of up to $10,000, and criminal penalties of not more than 2 years, or both. possible criminal penalties. It should also be noted that the sanctions apply to reporting company, the individual filing the BOI Report, and potentially any individual causing the reporting failure.

Take Aways For Financial Industry Professionals

To ensure your compliance with the Act, it is important to understand the impact of the Act on your business, and take prompt action to take an inventory of your potential exposure points. That action  should include:

  • Broker-dealers and SEC registered investment advisers need to inventory their organizational structure and determine whether related holding companies, subsidiaries and affiliated entities are reporting companies, or whether those entities fall under any exemptions. To the extent that they are not exempt, BOI Reports will need to be filed for all entities that are deemed to be reporting companies.
  • State registered advisers are not exempt, and as such, will have to file BOI Reports with FinCEN, in addition to any filings that might be required for its subsidiaries and affiliates.
  • Agents of both broker-dealers and investment advisers that have outside business activities (“OBAs”) should be advised to confirm with their lawyers or accountants whether those OBAs utilize an entity that is deemed to be a reporting company. If so, they too should take steps to ensure that the BOI Reports a promptly filed, as a failure to do so, could cause a reportable disclosure on their form U-4.

To assist you in your analysis of the Acts impact , FinCEN has prepared a Frequently Asked Questions (FAQ) covering a number of issues related to the CTA. However, whether your firm is currently a broker-dealer of an investment adviser, once it has been determined that BOI filings are required for any of your affiliates, subsidiaries or OBAs, you need to implement a plan to (i) obtain the corporate and beneficial ownership information and documentation necessary to timely file the required BOI Report prior to January 1, 2025; and (ii) implement procedures to assure future compliance with Act with respect to updates for changes in control and beneficial ownership.