‘The products and services referred to on this website can not be construed as advice or as an offer or invitation for U.S. Persons (in principle persons residing in the U.S. and entities organized or established in the U.S.) to buy and/or sell stocks or to purchase any other bank / insurance product.'
The text shown above can be seen on many of the websites of banks and investment consultants. But why are the products and services of these banks and investment consultants not for those known as ‘U.S. Persons'?
This is the result of the Dodd-Frank Act which President Obama signed last year on 23 June. This American Act represents a major review of the regulations and legislation relating to financial systems in the United States. Notable are the stringent and extensive registration requirements that the Dodd-Frank Act imposes on foreign investment consultants that manage in excess of USD 25 million of American assets. They have to register as a license holder with the American SEC (Securities and Exchange Commission) and must operate in accordance with the associated legislation. In addition, since 1 January of this year a new American tax guideline has come into force,Cost Basis Reporting, which imposes obligations on foreign investment consultants that wish to continue to advise U.S. Persons. Banks and investment consultants have until 21 July 2011 to register with the SEC, after which the Dodd-Frank Act comes into effect. Banks and financial institutions that are not registered with the SEC will then be in breach of the Act if they continue to advise U.S. Persons.
Many banks have consciously chosen not to register with the SEC. For them, registration with the SEC and the bureaucratic red tape of Cost Basis Reporting does not compensate for the revenues generated by retaining their U.S. Persons. In the course of this year, many banks shall therefore have to say good-bye to their American clients. U.S. Persons who wish to keep their assets in Europe will have to find a bank or investment consultant that is registered with the SEC and which is able to comply with the requirements of Cost Basis Reporting.
These persons will be looking for a needle in a haystack because only a few institutions in the Netherlands will be able to continue to serve U.S. Persons in the future. Highmount, a multi-family office with European offices in Amsterdam and Zurich, is one of the few. Highmount's registration with the SEC allows U.S. Persons to keep their assets in Europe.
Dominique van Hilten, Partner at Highmount: ‘From the moment that the Dodd-Frank Act was signed, I knew that many banks and investment consultants would encounter problems with their U.S. Persons because of the registration and Cost Basis Reporting requirements. I therefore sought a constructive solution to this problem and entered into a joint venture with a Swiss bank which acts as a deposit bank, whilst the assets continue to be managed by Highmount. In this way U.S. Persons are able to keep their assets in Europe and retain a European point of contract, which is a solution that works very well in practice. American clients from Staalbankiers and Theodoor Gilissen Bankiers, amongst others, have since transferred to Highmount.'
In the majority of cases, it is quickly clear to a bank whether a person is a U.S. Person. However, not all banks are aware of U.S. Persons amongst their clients. A bank has a legal obligation to identify U.S. Persons and to report them to the IRS. Time is now pressing for financial institutions without SEC registration that have not yet transferred their U.S. Persons because from 21 July 2011, at the latest, they will no longer be able to serve these clients. The final countdown has now started for them to transfer their American clients quickly to a party that can help them, such as Highmount Capital in Amsterdam and Zurich.
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