Appendix A to Part 356 - Bidder Categories
31:2.1.1.1.53.6.17.1.12 : Appendix A
Appendix A to Part 356 - Bidder Categories I. Categories of
Eligible Bidders
We describe below various categories of bidders eligible to bid
in Treasury auctions. You may use them to determine whether we
consider you and other persons or entities to be one bidder or more
than one bidder for auction bidding and compliance purposes. For
example, we use these definitions to apply the competitive and
noncompetitive award limitations and for other requirements.
Notwithstanding these definitions, we consider any persons or
entities that intentionally act together with respect to bidding in
a Treasury auction to collectively be one bidder. Even if an
auction participant does not fall under any of the categories
listed below, it is our intent that no auction participant receives
a larger auction award by acquiring securities through others than
it could have received had it been considered one of these types of
bidders.
(a) Corporation - We consider a corporation to be one
bidder. A corporation includes all of its affiliates, which may be
persons, partnerships, or other entities. We consider a business
trust, such as a Massachusetts or Delaware business trust, to be a
corporation. We use the term “corporate structure” to refer to the
collection of affiliates that we consider collectively to be one
bidder. An affiliate is any:
• Entity that is more than 50-percent owned, directly or
indirectly, by the corporation;
• Entity that is more than 50-percent owned, directly or
indirectly, by any other affiliate of the corporation;
• Person or entity that owns, directly or indirectly, more than
50 percent of the corporation;
• Person or entity that owns, directly or indirectly, more than
50 percent of any other affiliate of the corporation; or
• Entity, a majority of whose board of directors or a majority
of whose general partners are directors or officers of the
corporation, or of any affiliate of the corporation.
An entity that is more than 50-percent owned as described in
this definition is not an affiliate, however, if:
• The purpose of such ownership is to seek a return on
investment and not to engage in the business of the entity;
• The owner does not routinely exercise operational or
management control over the entity;
• The owner does not exercise any control over investment
decisions of the entity regarding U.S. Treasury securities;
• The corporation has written policies or procedures, including
ongoing compliance monitoring processes, that are designed to
prevent it from acting together with the entity regarding
participation in Treasury auctions or investment strategies
regarding Treasury securities being auctioned; and
• The corporation submits notice and certification to us, as
provided in this appendix A.
A corporation that plans to make use of this exception to the
definition of “affiliate” must inform us of this fact in writing
and provide the following certification:
[Name of corporation] hereby certifies that, with regard to any
entity of which it owns more than 50 percent as defined in appendix
A to 31 CFR part 356, but for which the purpose of such ownership
is to seek a return on investment and not to engage in the business
of the entity:
• We do not routinely exercise operational or management control
over the entity;
• We do not exercise any control over investment decisions of
the entity regarding U.S. Treasury securities;
• We have written policies or procedures, including ongoing
compliance monitoring processes, that are designed to prevent the
corporation from acting together with the entity regarding
participation in Treasury auctions or investment strategies
regarding Treasury securities being auctioned; and
• We will continue to meet the terms of this certification until
we notify the Treasury of a change.
(b) Partnership - We consider a partnership to be one
bidder if it is a partnership for which the Internal Revenue
Service has assigned a tax-identification number. A partnership
includes all of its affiliates, which may be persons, corporations,
general partners acting on behalf of the partnership, or other
entities. We use the term “partnership structure” to refer to the
collection of affiliates that we consider collectively to be one
bidder. We may consider a partnership structure that contains one
or more corporations as a “partnership” or a “corporation,” but not
both.
An affiliate is any:
• Entity that is more than 50-percent owned, directly or
indirectly, by the partnership;
• Entity that is more than 50-percent owned, directly or
indirectly, by any other affiliate of the partnership;
• Person or entity that owns, directly or indirectly, more than
50 percent of the partnership;
• Person or entity that owns, directly or indirectly, more than
50 percent of any other affiliate of the partnership; or
• Entity, a majority of whose general partners or a majority of
whose board of directors are general partners or directors of the
partnership or of any affiliate of the partnership.
An entity that is more than 50-percent owned as described in
this definition is not an affiliate, however, if:
• The purpose of such ownership is to seek a return on
investment and not to engage in the business of the entity;
• The owner does not routinely exercise operational or
management control over the entity;
• The owner does not exercise any control over investment
decisions of the entity regarding U.S. Treasury securities;
• The partnership has written policies or procedures, including
ongoing compliance monitoring processes, that are designed to
prevent it from acting together with the entity regarding
participation in Treasury auctions or investment strategies
regarding Treasury securities being auctioned; and
• The partnership submits notice and certification to us, as
provided in this appendix A.
A partnership that plans to make use of this exception to the
definition of “affiliate” must inform us of this fact in writing
and provide the following certification:
[Name of partnership] hereby certifies that, with regard to any
entity of which it owns more than 50 percent as defined in appendix
A to 31 CFR part 356, but for which the purpose of such ownership
is to seek a return on investment and not to engage in the business
of the entity:
• We do not routinely exercise operational or management control
over the entity;
• We do not exercise any control over investment decisions of
the entity regarding U.S. Treasury securities;
• We have written policies or procedures, including ongoing
compliance monitoring processes, that are designed to prevent the
partnership from acting together with the entity regarding
participation in Treasury auctions or investment strategies
regarding Treasury securities being auctioned; and
• We will continue to meet the terms of this certification until
we notify the Treasury of a change.
(c) Government-related entity - We consider each of the
following entities to be one bidder:
(1) A state government or the government of the District of
Columbia
(2) A unit of local government, including any county, city,
municipality, or township, or other unit of general government as
defined by the Bureau of the Census for statistical purposes.
(3) A commonwealth, territory, or possession of the United
States.
(4) A governmental entity, body, or corporation established
under Federal, State, or local law.
(5) A foreign central bank, the government of a foreign state,
or an international organization in which the United States holds
membership. This type of entity applies only when such entity is
not using an account at the Federal Reserve Bank of New York (See
paragraph (f).).
We generally consider an investment, reserve, or other fund of
one of the above government-related entities as part of that entity
and not a separate bidder. We will consider a government-related
entity's fund to be a separate bidder if it meets the definition of
the “trust or other fiduciary estate” category, or if applicable
law requires that the investments of such fund be made
separately.
(d) Trust or other fiduciary estate - We consider a legal
entity created under a valid trust instrument, court order, or
other legal authority that designates a trustee or fiduciary to act
for the benefit of a named beneficiary to be one bidder. The
following conditions must also be met for us to consider a trust
entity to be one bidder:
• The legal entity must be able to be identified by:
1. The name or title of the trustee or fiduciary;
2. Specific reference to the trust instrument, court order, or
legal authority under which the trustee or fiduciary is acting;
and
3. The unique IRS-assigned employer identification number (not
social security number) for the entity.
• The trustee or fiduciary must make the decisions on
participating in auctions on behalf of the trust or fiduciary
estate.
(e) Individual - We consider a person to be one bidder,
regardless of whether he or she is acting as an individual, a sole
proprietor, or for any entity not otherwise defined as a bidder. If
a person meets the definition of an affiliate within a corporate or
partnership structure, we will consider him or her to be a bidder
in this “individual” category if the corporation or partnership is
not bidding in the same auction. We do not consider a person acting
in an official capacity as an employee or other representative of a
bidder defined in any other category to be an “individual” bidder.
We consider a person, his or her spouse, and any children under the
age of 21 having a common household to be one “individual”
bidder.
(f) Foreign and International Monetary Authority (“FIMA”)
- We consider one or more parties making up a foreign or
international monetary organization that is not private in nature
to be a bidder called a FIMA entity if at least one of the parties
is a foreign or international entity that is (i) financial in
nature, or (ii) not financial in nature but is authorized to open
an account at the Federal Reserve Bank of New York. We consider
each of the following entities to be a single FIMA entity:
(1) A foreign central bank or regional central bank.
(2) A foreign governmental monetary or finance entity.
(3) A non-governmental international financial organization that
is not private in nature (for example, the International Monetary
Fund, the World Bank, the Inter-American Development Bank, and the
Asian Development Bank).
(4) A non-financial international organization that the United
States participates in (for example, the United Nations).
(5) A multi-party arrangement of a governmental ministry and/or
a foreign central bank or monetary authority with a United States
Government Department and/or the Federal Reserve Bank of New
York.
(6) A foreign or international monetary entity or an entity
authorized by statute or by us to open accounts at the Federal
Reserve Bank of New York.
(g) Other Bidder - We do not consider a bidder defined by
any of the above categories to be a bidder in this category. For
purposes of this definition, “other bidder” means an institution or
organization with a unique IRS-assigned employer identification
number. This definition includes such entities as an association,
church, university, union, or club. This category does not include
any person or entity acting in a fiduciary or investment management
capacity, a sole proprietorship, an investment account, an
investment fund, a form of registration, or investment ownership
designation.
II. How To Obtain Separate Bidder Recognition
Under certain circumstances, we may recognize a major
organizational component (e.g., the parent or a subsidiary) in a
corporate or partnership structure as a bidder separate from the
larger corporate or partnership structure. We also may recognize
two or more major organizational components collectively as one
bidder. All of the following criteria must be met for such
component(s) to qualify for recognition as a separate bidder:
(a) Such component(s) must be prohibited by law or regulation
from exchanging, or must have established written internal
procedures designed to prevent the exchange of, information related
to bidding in Treasury auctions with any other component in the
corporate or partnership structure;
(b) Such component(s) must not be created for the purpose of
circumventing our bidding and award limitations;
(c) Decisions related to purchasing Treasury securities at
auction and participation in specific auctions must be made by
employees of such component(s). Employees of such component(s) that
make decisions to purchase or dispose of Treasury securities must
not perform the same function for other components within the
corporate or partnership structure; and
(d) The records of such component(s) related to the bidding for,
acquisition of, and disposition of Treasury securities must be
maintained by such component(s). Those records must be identifiable
- separate and apart from similar records for other components
within the corporate or partnership structure. To obtain
recognition as a separate bidder, each component or group of
components must request such recognition from us, provide a
description of the component or group and its position within the
corporate or partnership structure, and provide the following
certification:
[Name of the bidder] hereby certifies that to the best of its
knowledge and belief it meets the criteria for a separate bidder as
described in appendix A to 31 CFR part 356. The above-named bidder
also certifies that it has established written policies or
procedures, including ongoing compliance monitoring processes, that
are designed to prevent the component or group of components
from:
(1) Exchanging any of the following information with any other
part of the corporate [partnership] structure: (a) Yields, discount
rates, or discount margins at which it plans to bid; (b) amounts of
securities for which it plans to bid; (c) positions that it holds
or plans to acquire in a security being auctioned; and (d)
investment strategies that it plans to follow regarding the
security being auctioned, or
(2) In any way intentionally acting together with any other part
of the corporate [partnership] structure with respect to
formulating or entering bids in a Treasury auction.
The above-named bidder agrees that it will promptly notify the
Department in writing when any of the information provided to
obtain separate bidder status changes or when this certification is
no longer valid.
[69 FR 45202, July 28, 2004, as amended at 70 FR 29456, May 23,
2005; 78 FR 46430, July 31, 2013]