firma training conference anniversary washington, d.c. regulatory & legislative update sally...
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FIRMAFIRMATraining Conference AnniversaryTraining Conference Anniversary
Washington, D.C.Washington, D.C.
Regulatory & Legislative UpdateRegulatory & Legislative Update
Sally MillerSally MillerABAABA
[email protected]@aba.com(202) 663-5325(202) 663-5325
April 10, 2006April 10, 2006 22
Mutual FundsMutual Funds
Bank BrokerageBank Brokerage
TaxTax
Pension IssuesPension Issues
OtherOther
April 10, 2006April 10, 2006 33
Mutual FundsMutual Funds
Market TimingMarket Timing
Late TradingLate Trading
April 10, 2006April 10, 2006 44
Market TimingMarket Timing
What is it?What is it?
SEC responseSEC response– Not mandatoryNot mandatory– Up to 2% feeUp to 2% fee– Turnaround of 7 or moreTurnaround of 7 or more– Calendar daysCalendar days
Compliance Date – 10/16/06Compliance Date – 10/16/06
April 10, 2006April 10, 2006 55
Rule 22c-2Rule 22c-2
Fund required to have signed agreement Fund required to have signed agreement with financial intermediarywith financial intermediary
Financial intermediaryFinancial intermediary– Bank that holds securities of record in Bank that holds securities of record in
nominee namenominee name– Participant directed employee benefit plan: Participant directed employee benefit plan:
retirement plan administrator or any entity that retirement plan administrator or any entity that maintains plan recordsmaintains plan records
April 10, 2006April 10, 2006 66
Model ContractsModel Contracts
ICI/SIAICI/SIA
SPARKSPARK
Both negotiableBoth negotiable
April 10, 2006April 10, 2006 77
SEC 2/28/06 GuidanceSEC 2/28/06 Guidance
Small intermediariesSmall intermediaries
Intermediary chainsIntermediary chains
Privacy issues/shareholder committeesPrivacy issues/shareholder committees
April 10, 2006April 10, 2006 88
Inform customers?Inform customers?
Defined benefit plans/charitable Defined benefit plans/charitable foundationsfoundations
Name of investment professionalName of investment professional
April 10, 2006April 10, 2006 99
Late TradingLate Trading
SEC proposes “Hard 4”SEC proposes “Hard 4”
ABA/others objectABA/others object
ABA/SPARK alternativeABA/SPARK alternative– Fraud proof/time-stamping ordersFraud proof/time-stamping orders– Annual certificationsAnnual certifications– Annual auditAnnual audit– Supervisory oversightSupervisory oversight
SEC is considering alternativeSEC is considering alternative
April 10, 2006April 10, 2006 1010
Collective FundsCollective Funds
Operational controls to monitor:Operational controls to monitor:
– Admissions and withdrawals to deter Admissions and withdrawals to deter opportunities to engage in late tradingopportunities to engage in late trading
– Compliance with collective investment fund Compliance with collective investment fund plan provisions regarding market timingplan provisions regarding market timing
April 10, 2006April 10, 2006 1111
Soft DollarsSoft Dollars
April 10, 2006April 10, 2006 1212
Gramm-Leach Bliley ActGramm-Leach Bliley Act
Implementation of Title II/Push-out Implementation of Title II/Push-out provisionsprovisions
Loss of blanket exemption from brokerage Loss of blanket exemption from brokerage registrationregistration
April 10, 2006April 10, 2006 1313
Trust and fiduciaryTrust and fiduciary
CustodyCustody
Dual employee/compensation issuesDual employee/compensation issues
April 10, 2006April 10, 2006 1414
Trust and FiduciaryTrust and Fiduciary
How do bank trust departments get paid?How do bank trust departments get paid?
SEC focusSEC focus– 12b-1 fees12b-1 fees– Transaction feesTransaction fees– Measure on an account-by-account levelMeasure on an account-by-account level
April 10, 2006April 10, 2006 1515
CustodyCustody
Prohibition on order-takingProhibition on order-taking
Industry positionIndustry position– Non-negotiableNon-negotiable– Limits:Limits:
Flat, securities movement feeFlat, securities movement fee
AdvertisingAdvertising
April 10, 2006April 10, 2006 1616
CompensationCompensation
Commercial side of house: institutional Commercial side of house: institutional and retailand retail
Nominal, one-time referral feeNominal, one-time referral fee
Impact on bonus plansImpact on bonus plans
April 10, 2006April 10, 2006 1717
Dual EmployeeDual Employee
Fix for compensation issuesFix for compensation issues
Host of other problemsHost of other problems
What are other banks doing?What are other banks doing?
April 10, 2006April 10, 2006 1818
StatusStatus
Broad oppositionBroad opposition
Delayed until 9/30/06Delayed until 9/30/06
Bank industry: new proposal neededBank industry: new proposal needed
April 10, 2006April 10, 2006 1919
Estate TaxEstate Tax
Phase-out by 2010Phase-out by 2010
Repeal but carryover basisRepeal but carryover basis
2011, reverts to $1 million exemption 2011, reverts to $1 million exemption (2002 level)(2002 level)
April 10, 2006April 10, 2006 2020
Congressional ResponseCongressional Response
House – complete and permanent repealHouse – complete and permanent repeal– Carryover basisCarryover basis
Senate – compromiseSenate – compromise– $5 million exemption/15% tax rate$5 million exemption/15% tax rate– Step-up in basisStep-up in basis
April 10, 2006April 10, 2006 2121
Other Tax IssuesOther Tax Issues
Tax free contributions to charity from IRATax free contributions to charity from IRA
Type III supporting organizationsType III supporting organizations
Dividend and capital gains tax ratesDividend and capital gains tax rates
April 10, 2006April 10, 2006 2222
Pension IssuesPension Issues
2001 Tax Act – Permanency2001 Tax Act – Permanency– Deferral amounts: $15,000/$5,000Deferral amounts: $15,000/$5,000– Roth 401(k)Roth 401(k)– PortabilityPortability– Catch-up provisionsCatch-up provisions
April 10, 2006April 10, 2006 2323
Other Pension IssuesOther Pension Issues
Investment adviceInvestment advice
Automatic enrollmentAutomatic enrollment
Cash balance plansCash balance plans
Prohibited transaction reliefProhibited transaction relief
April 10, 2006April 10, 2006 2424
Taft-Hartley PlansTaft-Hartley Plans
LM-10 reporting requirementsLM-10 reporting requirements
Bank exceptionBank exception
April 10, 2006April 10, 2006 2525
OtherOther
FDIC insurance coverageFDIC insurance coverage– Raised to $250,000Raised to $250,000– Collateral requirementsCollateral requirements
Entitlement CommissionEntitlement Commission
HSAsHSAs
April 10, 2006April 10, 2006 2626
CONCLUSIONCONCLUSION