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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.

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washington and regulatory update

Washington and Regulatory Update

Iowa Trust Association Conference

Thursday, October 2, 2014

Phoebe Papageorgiou

American Bankers Association

aba.com1-800-BANKERS

one year later
One Year Later…
  • IRS Guidance on Trustee Fees
  • Dodd Frank Act Rulemaking
  • Fiduciary and Investment-Related Developments
irc 67 e final rule
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
irc 67 e final rule1
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
irc 67 e final rule2
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
irc 67 e final rule3
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
irc 67 e final rule cont
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
sec money market fund final rule1
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.”

9

sec money market fund final rule2
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

10

sec money market fund final rule3
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

11

municipal advisor final rule
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
volcker final rule
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
occ bulletin on vendor management
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
latest uniform law developments
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
aba comments on occ regulation 9
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
slide17

Questions?

Phoebe Papageorgiou

phoebep@aba.com