Washington and Regulatory Update

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aba.com 1-800-BANKERS Washington and Regulatory Update Iowa Trust Association Conference Thursday, October 2, 2014 Phoebe Papageorgiou American Bankers Association aba.com 1-800-BANKERS

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Washington and Regulatory Update. Iowa Trust Association Conference Thursday, October 2, 2014 Phoebe Papageorgiou American Bankers Association. aba.com 1-800-BANKERS. One Year Later…. IRS Guidance on Trustee Fees Dodd Frank Act Rulemaking Fiduciary and Investment-Related Developments. - PowerPoint PPT Presentation

Transcript of Washington and Regulatory Update

Page 1: Washington and Regulatory Update

aba.com 1-800-BANKERS

Washington and Regulatory

Update Iowa Trust Association Conference

Thursday, October 2, 2014

Phoebe PapageorgiouAmerican Bankers Association

aba.com 1-800-BANKERS

Page 2: Washington and Regulatory Update

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One Year Later…

• IRS Guidance on Trustee Fees

• Dodd Frank Act Rulemaking

• Fiduciary and Investment-Related Developments

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IRC 67(e) Final Rule

• General Rule: cost subject to 2% floor if– 67(b) itemized miscellaneous deduction, – Incurred by an estate & non-grantor Trust, and– “commonly” or “customarily” incurred by an

individual

• The type not the description of a product or service is determinative of whether it is commonly or customarily incurred

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IRC 67(e) Final Rule

• Ownership costs subject to 2% floor– condo fees, insurance premiums, certain

partnership costs

• Tax prep fees not subject to the 2% floor– estate and GST tax returns, fiduciary income

tax returns, and decedent’s final 1040

• Tax prep fees subject to the 2% floor – all other tax returns

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IRC 67(e) Final Rule

• General Rule: Investment Advisory Fees Subject to 2% Floor

• Exception for incremental fees:– Added solely because advice rendered to trust or

estate– For unusual investment objective – For specialized balancing of the interests of various

parties (beyond the usual balancing of the varying interests of current beneficiaries and remaindermen)

• Exception is limited to portion of fee that exceeds that which an individual normally incurs

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IRC 67(e) Final Rule

• Allocation Requirement for “Bundled” Fee– Components of fee must be allocated properly

between that which is subject to 2% floor and that which is not

• Exception – If fee not computed on an hourly basis, only

portion of fee that is attributable to investment advice is subject to the 2% floor

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IRC 67(e) Final Rule, Cont.

• Important Note: Rule only applies to the taxation of trusts/estates. Does not otherwise regulate or affect fiduciary fees

• Amended Effective Date: Tax years starting on or after January 1, 2015

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SEC Money Market Fund Final Rule

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Type NAV Permissible Investors

Liquidity Fees/Redemption

Rules Apply?

Government Funds

Stable All Permissible, not required

Retail Prime Funds

StableRetail Investors (i.e.,

“beneficial owners” are natural persons)

Yes

Institutional Prime Funds

Floating All Yes

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SEC Money Market Fund Final Rule

Omnibus Investments in Retail MMMFs: • Funds must have policies/procedures reasonably

designed to limit beneficial owners to natural persons

• Fund and intermediaries may engage in contractual arrangements or periodic certifications to meet the eligibility rules

• Intermediaries subject to liability for violations of “federal securities laws, including the antifraud provisions, where institutional investors are improperly funneled into retail funds.”

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SEC Money Market Fund Final Rule

Rules for Liquidity Fees and Redemption Gates • Apply to all Prime Funds. Permissible for

Government Funds

• If less than 30% of total assets in weekly liquid assets (WLA):– Discretionary Liquidity Fee of up to 2% on

redemptions– Suspension of redemptions allowed up to 10 days

• If less than 10% of total assets in WLA– Default Liquidity Fee of 1% on redemptions

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SEC Money Market Fund Final Rule

• New diversification and disclosure rules for MMMFs.

• IRS tax reporting relief for FNAV MMMFs

• Compliance Dates–Diversification/disclosure: 4/14/15– FNAV and Fees/Gates: 10/14/16

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Municipal Advisor Final Rule

• Must register if advising municipal entity on:– issuance of municipal securities or – municipal financial products (e.g., investment of

proceeds of municipal securities)

• SEC FAQs

• MSRB Proposals: Fiduciary duty; Professional qualifications; Supervision/Compliance

• Registration Deadline was July 1, 2014

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Volcker Final Rule

• Generally regulates Banking Entity’s proprietary trading and sponsorship/ownership of “Covered Funds”

• Exceptions for certain activity on behalf of fiduciary customers

• Definitions/Interpretations : What is a “Banking Entity,” “Covered Fund,” an “Illiquid Fund”?

• ABA Focus: examiner guidance; interpretive guidance/authority

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OCC Bulletin on Vendor Management

• Responsibility of board and senior management: ensure that 3rd party activity is performed in safe and sound manner and in compliance with applicable laws

• Elements of Appropriate Risk Management– Proper due diligence in selecting a third party– Monitoring of third party’s activities and performance– Independent reviews of risk management process

• Vendors include tax software/preparation companies, RIAs, appraisers

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Latest Uniform Law Developments

• Uniform Fiduciary Access to Digital Assets Act – expected to be approved this summer

• Trust Decanting Drafting Committee

• Trust Protector Study Committee

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ABA Comments on OCC Regulation 9

• Letter to OCC on Part 9 as part of the EGRPRA Review

• Recommended ways to modernize rules and provide reasonable relief

• Specific Comments on– 9.8, Recordkeeping– 9.10, Fiduciary Funds Awaiting Investment or Distribution– 9.13, Custody of Fiduciary Assets– 9.14, Deposit of Securities with State Authorities– 9.18, Collective Investment Funds

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Questions?

Phoebe [email protected]