9. What is a foreign financial institution?

The definition of a 'foreign financial institution' (FFI) is very broad and is expected to encompass a number of entities, generally not always considered to be financial institutions. The term 'foreign financial institution' means:

• A custodial institution*, for example a bank/broker holding securities for a client.
• A depository institution*, for example a bank or mutual bank.
• A specified insurance company, for example a long-term issuer that issues cash value retirement, annuity, or endowment policies.
• An investment entity*, for example an asset manager, a collective investment scheme or hedge fund.

'Investment entity' includes two types of entities:

1. An entity* that primarily conducts itself as a business, performing one or more of the following activities or operations for or on behalf of a client:

• trading in money market instruments for example cheques, bills, certificates of deposit and derivatives, foreign exchange, exchange, interest rate and index instruments, transferable securities, or commodity futures;
• individual and collective portfolio management; or
• investing, administering, or managing financial assets or money on behalf of other persons.

These activities or operations do not include rendering non-binding investment advice to a client.

2. The second type of investment entity (an investment entity managed by another financial institution) is any entity whose gross income is primarily attributable to investing, reinvesting, or trading in financial assets, and where the entity is managed by another entity that is a depository institution, a custodial institution, a specified insurance company or the type of investment entity described in (1) above.

Generally non-US entities such as banks, broker/dealers, insurance companies, hedge funds, securitisation vehicles and private equity funds will be considered FFIs.

*For any defined terms please see the Table of terms and definitions.