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FIRMA Training Conference Anniversary Washington, D.C.

FIRMA Training Conference Anniversary Washington, D.C. Regulatory & Legislative Update Sally Miller ABA smiller@aba.com (202) 663-5325. Mutual Funds Bank Brokerage Tax Pension Issues Other. Mutual Funds. Market Timing Late Trading. Market Timing. What is it? SEC response

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FIRMA Training Conference Anniversary Washington, D.C.

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  1. FIRMATraining Conference AnniversaryWashington, D.C. Regulatory & Legislative Update Sally Miller ABA smiller@aba.com (202) 663-5325

  2. Mutual Funds • Bank Brokerage • Tax • Pension Issues • Other April 10, 2006

  3. Mutual Funds • Market Timing • Late Trading April 10, 2006

  4. Market Timing • What is it? • SEC response • Not mandatory • Up to 2% fee • Turnaround of 7 or more • Calendar days • Compliance Date – 10/16/06 April 10, 2006

  5. Rule 22c-2 • Fund required to have signed agreement with financial intermediary • Financial intermediary • Bank that holds securities of record in nominee name • Participant directed employee benefit plan: retirement plan administrator or any entity that maintains plan records April 10, 2006

  6. Model Contracts • ICI/SIA • SPARK • Both negotiable April 10, 2006

  7. SEC 2/28/06 Guidance • Small intermediaries • Intermediary chains • Privacy issues/shareholder committees April 10, 2006

  8. Inform customers? • Defined benefit plans/charitable foundations • Name of investment professional April 10, 2006

  9. Late Trading • SEC proposes “Hard 4” • ABA/others object • ABA/SPARK alternative • Fraud proof/time-stamping orders • Annual certifications • Annual audit • Supervisory oversight • SEC is considering alternative April 10, 2006

  10. Collective Funds • Operational controls to monitor: • Admissions and withdrawals to deter opportunities to engage in late trading • Compliance with collective investment fund plan provisions regarding market timing April 10, 2006

  11. Soft Dollars April 10, 2006

  12. Gramm-Leach Bliley Act • Implementation of Title II/Push-out provisions • Loss of blanket exemption from brokerage registration April 10, 2006

  13. Trust and fiduciary • Custody • Dual employee/compensation issues April 10, 2006

  14. Trust and Fiduciary • How do bank trust departments get paid? • SEC focus • 12b-1 fees • Transaction fees • Measure on an account-by-account level April 10, 2006

  15. Custody • Prohibition on order-taking • Industry position • Non-negotiable • Limits: • Flat, securities movement fee • Advertising April 10, 2006

  16. Compensation • Commercial side of house: institutional and retail • Nominal, one-time referral fee • Impact on bonus plans April 10, 2006

  17. Dual Employee • Fix for compensation issues • Host of other problems • What are other banks doing? April 10, 2006

  18. Status • Broad opposition • Delayed until 9/30/06 • Bank industry: new proposal needed April 10, 2006

  19. Estate Tax • Phase-out by 2010 • Repeal but carryover basis • 2011, reverts to $1 million exemption (2002 level) April 10, 2006

  20. Congressional Response • House – complete and permanent repeal • Carryover basis • Senate – compromise • $5 million exemption/15% tax rate • Step-up in basis April 10, 2006

  21. Other Tax Issues • Tax free contributions to charity from IRA • Type III supporting organizations • Dividend and capital gains tax rates April 10, 2006

  22. Pension Issues • 2001 Tax Act – Permanency • Deferral amounts: $15,000/$5,000 • Roth 401(k) • Portability • Catch-up provisions April 10, 2006

  23. Other Pension Issues • Investment advice • Automatic enrollment • Cash balance plans • Prohibited transaction relief April 10, 2006

  24. Taft-Hartley Plans • LM-10 reporting requirements • Bank exception April 10, 2006

  25. Other • FDIC insurance coverage • Raised to $250,000 • Collateral requirements • Entitlement Commission • HSAs April 10, 2006

  26. CONCLUSION April 10, 2006

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