In 2016, the Financial Crimes Enforcement Network (FinCEN) issued a rule that requires all financial institutions, like Guideline, to conduct due diligence to identify and verify individuals who own or control a company. As a result, Guideline must collect certain personal identifying information of owners within your organization when you open a 401(k) plan.
Please be assured that the collection of this information is a legal obligation and a standard practice within the financial industry. Guideline is committed to making this process as clear and straightforward as possible, providing support and guidance to ensure a compliant and efficient plan onboarding experience.
The following explains these requirements and clarifies who needs to be identified during this process.
What is beneficial ownership?
A "beneficial owner" is defined as any individual or entity that owns 25% or more of a company's equity interests. This can encompass various forms of ownership, including common and preferred shares, stock options, voting rights, convertible securities, or any other instruments that confer equity, capital, or profit interests in the legal entity.
Some companies might not have anyone owning 25% or more, while others might have up to four beneficial owners.
What is a control person?
A “control person” is an individual who has significant responsibility to manage or direct the company, such as an executive officer or senior manager. Only one person can be designated as the control person. It is possible for the control person to also be a beneficial owner.
Are there any exceptions?
While the beneficial ownership rule applies broadly to most legal entity customers of financial institutions, certain categories of companies are explicitly exempt from the requirement to provide beneficial ownership information. These exemptions are generally based on the premise that these entities are already subject to robust regulatory oversight or are less susceptible to being used for illicit financial activities. This includes entities registered with the Securities and Exchange Commission (SEC) under certain investment acts, banks, and some other public companies.
Where can I find more information?
To learn more about beneficial ownership rules, feel free to view the linked articles from the Financial Industry Regulatory Authority (FINRA) and FinCEN.