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Regulatory & Legislative Update on Mutual Funds and Tax Issues - ABA Conference

Join the ABA conference in Washington, D.C. on April 10, 2006, for a comprehensive update on mutual funds, market timing, late trading, rule 22c-2, model contracts, soft dollars, Gramm-Leach-Bliley Act, trust and fiduciary matters, custody issues, compensation, estate tax, Congressional responses, pension issues, Taft-Hartley plans, and other financial regulatory and legislative matters. Engage in discussions on industry updates, best practices, and compliance requirements. Stay informed and network with industry experts at this vital event.

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Regulatory & Legislative Update on Mutual Funds and Tax Issues - ABA Conference

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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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