What the U.S. “FAT CAT” Legislation Means for Funds and Fund Managers Recently proposed legislation could have a significant impact on non-U.S. investment funds, including private equity funds and hedge funds. The bill is titled the “Foreign Account Tax Compliance Act of 2009” (the Act). The Act has already earned the nickname “FAT CAT” based on its acronym. The Act would affect foreign investment funds that invest in or otherwise deal with U.S. equity or debt securities (including U.S. government securities) or that have any U.S. individual taxpayers (U.S. citizens or residents, including “green card” holders) as direct or indirect investors or lenders. If enacted, the Act is likely to have more of an impact on the global financial system than any U.S. tax law change in more than a decade. Although the Act has many broad provisions, this client alert focuses on the provisions we believe are primarily of interest to investment funds. The Act imposes significant reporting and information gathering obligations on funds and others which are enforced through new withholding taxes and substantial penalties for non-compliance.