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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


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.”


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


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


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


Phoebe Papageorgiou