More On Legal & Compliancefrom The Advisor's Professional Library
- Using Solicitors to Attract Clients Rule 206(4)-3 under the Investment Advisors Act establishes requirements governing cash payments to solicitors. The rule permits payment of cash referral fees to individuals and companies recommending clients to an RIA, but requires four conditions are first satisfied.
- The Custody Rule and its Ramifications When an RIA takes custody of a clients funds or securities, risk to that individual increases dramatically. Rule 206(4)-2 under the Investment Advisers Act (better known as the Custody Rule), was passed to protect clients from unscrupulous investors.
The U.S. Treasury and the IRS, as well as several foreign governments, announced jointly Wednesday proposed regulations for the implementation of information reporting and withholding tax provisions of the Foreign Account Tax Compliance Act (FATCA). The regulations are to be phased in in stages.
The governments of France, Germany, Italy, Spain and the U.K. joined with the Treasury Department to express intent to use a government-to-government framework to implement the requirements of FATCA, which target noncompliance by U.S. taxpayers using foreign accounts.
The regulations provide, according to the agencies, “a step-by-step process for U.S. account identification, information reporting, and withholding requirements for foreign financial institutions, other foreign entities, and U.S. withholding agents.”
In a statement, Acting Assistant Secretary for Tax Policy Emily S. McMahon said, “When taxpayers overseas avoid paying what they owe, other Americans have to bear a disproportionate share of the tax burden. FATCA is an important part of the U.S. government’s effort to address that issue, and these regulations implement FATCA in a way that is targeted and efficient. We believe these efforts will serve as a complement and catalyst to the ongoing global efforts to combat offshore tax evasion.”
The agencies said the implementation schedule has been geared toward minimizing the expense and burden of reaching compliance objectives. Time has also been built into the schedule to allow for delays in resolving local law limitations that may affect some foreign financial institutions, or FFIs. FFIs will also report to their own governments, rather than to the IRS.
The regulations provide means of carrying out due diligence and identifying accounts, in many cases, through information already collected by FFIs. They also expand the categories of FFIs that are deemed to comply without the need for an agreement with the IRS, so that more attention can be focused on higher-risk institutions. In order to allow financial institutions time to put reporting systems in place, the transition period will be implemented in stages.
Kenneth E. Bentsen Jr., executive vice president, public policy and advocacy of the Securities Industry and Financial Markets Association, issued a statement in response to the proposed regulations. He thanked the agencies for incorporating so many of the comments and suggestions provided during the comment period, and acknowledged the value of a transition period in order to implement the regulations.
However, he said in part, “The proposed regulations are nearly 400 pages long and include substantial modifications to the preliminary IRS guidance on FATCA.... [I]mplementation of FATCA will impose significant challenges and costs for many United States financial services firms and their customers.... [I]t will take time to fully assess the impact of these new rules on financial markets, on bilateral and multilateral tax cooperation, and on foreign investment in the United States.”
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