More On Legal & Compliancefrom The Advisor's Professional Library
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
As Congress gears up for a week-long series of hearings on financial regulatory reform--the House Financial Services Committee held a hearing October 21; the Senate Banking Committee and the House Oversight & Government Reform Committee will hold hearings October 23; and the House Education and Labor Committee plans a hearing October 24 on economic recovery and spurring job growth--the Departments of Labor and Treasury, and the Internal Revenue Service (IRS), are laying out their regulatory agendas, specifically as they deal with retirement planning issues.
Tom Reeder, an attorney with Treasury's office of tax policy, says that while Treasury has been occupied with implementing the Emergency Economic Stabilization Act (EESA) and its TARP plan, Treasury and Congress "are looking at ways to change" the rules that say retirees in IRAs must continue to take their required minimum distributions. As retirement plans' values have plummeted during the market crisis, these "retirees may not want to take out as much as the current regs require," Reeder told attendees during the American Society of Pension Professionals and Actuaries (ASPPA) annual meeting in Washington. He urged these retirees to avoid taking money out of their IRAs until December 31 of this year.
Reeder also said Treasury's plans to issue guidance for the remainder of 2008 and into 2009 will be "robust," with "a lot of finalization of regs that relate to the Pension Protection Act (PPA)," including those that apply to defined benefit plans. Treasury, he said, is also working on a "remedial amendment program" for 403(b) plans, as the new 403(b) regulations come into effect in January. Under the Treasury program, "if you have problems in 2009" concerning the new 403(b) regs, "you'll be able to correct them," he said.
Treasury is also "close" to being finished with guidance concerning the new Heroes Earnings Assistance Relief Tax Act of 2008 (HEART Act), which provides tax breaks to military service personnel and their families, and includes many requirements that affect retirement plans. Reeder also promised that Treasury would issue final regulations concerning automatic enrollment in retirement plans by year-end.
The retirement planning community, Reeder noted, is also anxiously awaiting technical corrections to the Pension Protection Act. Such technical corrections "will provide a lot of relief in the coming year as things will come up that the PPA does not allow us to do," he said.
Brad Campbell of the Department of Labor was also on hand at the ASPPA meeting, and noted that DOL plans to issue final regulations by year end on its investment advice proposal. With all of the market turmoil, "now is the best time [for employees] to have access to investment advice," he said.
As for the Pension Benefit Guaranty Corporation (PBGC), Vincent Snowbarger of the PBGC told ASPPA attendees that despite rumors to the contrary, the PBGC "won't need a bailout anytime soon." The PBGC has $55 billion to pay benefits, he said, so we won't reach crisis stage for some time."