1. Finra warns brokers that complicated investments may be risky for them, too
The
Financial Industry Regulatory Authority Inc. is putting brokers on notice that when it comes to complicated investment products extra care is needed. In a regulatory
notice, Finra outlined characteristics of what it calls “complex products,” which could include structured notes, inverse or leveraged exchange-traded funds, hedge funds and securitized products such as asset-backed securities. Firms should have formal written procedures covering everything from the initial due diligence to post-sale performance, the self regulator said. The notice specifically identifies duties that fall to individual brokers in understanding complicated products and explaining them to customers. The Structured Products Association said the guidelines appear to be similar to what European regulators have done. For
more.
2. Bill to stop July's federal student loan rate increase proposed
Rep. Bruce Braley, D-Iowa, introduced a
bill to keep the interest rate for federally subsidized student loans at the current rate of 3.4%, a level that will double on July 1 if no action is taken by Congress. If the rate were to jump to 6.8%, a student who took out the maximum $23,000 through a subsidized Stafford loan would pay an additional $11,000 in interest over 20 years, according to Mr. Braley.
Another student loan measure,
HR 3240, would require private student loan providers to explicitly disclose student and cosigner repayment obligations if the student should die or become incapacitated. The measure, and another in the Senate,
S 1748, are known as Christopher's Law after Rutgers University student Christopher Bryski. He died in 2006 after an accident and his family is still paying down his student loan debt. The House bill was referred to a subcommittee on financial institutions and consumer credit on Jan. 12.
3. SEC asks for public input for financial literacy study
The Securities and Exchange Commission wants the public to weigh in on financial literacy and investor disclosure issues, topics that the commission is required to review by July 21 under the Dodd-Frank financial reform legislation. The commission wants the public to
comment on ways of improving the timing, content and format of disclosures for investment products, services and for financial intermediaries. It also wants information about what retail investors need to know to make smart decisions on hiring a financial intermediary or buying an investment product or service, including mutual funds. The SEC also asked for feedback on how the cost of investments and possible conflicts of interest could be made more transparent to investors. It will accept comments for 60 days. As part of the study, the commission also will be conducting investor testing using qualitative and quantitative public opinion research methods.
4. Supreme Court won't even listen to Finra case
The nation's highest court declined to hear an appeal of a lawsuit that was filed in 2007 by broker dealer Standard Investment Chartered Inc. against NASD over its merger with the regulatory unit of the
New York Stock Exchange. The firm claimed the proxy used by NASD in soliciting member approval for the merger was fraudulent. NASD, now called the Finra, had the claim dismissed in 2010 by a New York federal court and last year, the 2nd U.S. Circuit Court of Appeals upheld that decision. For
more.
5. Bill would kill the death tax
Rep. Tim Huelskamp, R-Kansas, proposed a bill that would permanently repeal the estate tax and repeal certain other taxes, including the alternative minimum tax, or AMT.
HR 3804 also would prohibit all of the ObamaCare tax increases from taking effect in 2013. Another bill introduced earlier in the year,
HR 1259, would repeal what opponents call the death tax, but it also would modify the gift tax. For 2011 and 2012, the estate tax rate is set at 35% and applies only to estates worth more than $5 million, or $10 million for couples. Those rates are set to expire at the end of 2012.
6. Derivatives “tax subsidy” targeted in Senate bill
Sen. Carl Levin, D-Michigan, proposed a bill to end a derivatives blended rate loophole.
S 2033 would eliminate what he said is a tax subsidy that allows traders in derivatives to buy and sell these complex instruments in a short period of time, yet claim up to 60% of the income they earn from them as a long-term capital gain. Taxpayers generally can only claim the lower
capital gains tax rate on earnings if they are derived from the sale of assets held more than a year. The American Bar Association Tax Section has called for ending the loophole. The bill was referred to the Senate Finance Committee.
7. Financial firms complain about timing of DOL request for IRA information
Financial industry groups told the Labor Department they can't fulfill a request for information about their individual retirement account businesses until they better understand what data the agency is seeking. The agency had asked for companies to supply information by Jan. 15 so it can conduct an “expanded regulatory impact analysis” to determine the impact a planned rule to expand the definition of “fiduciary” for a retirement plan would have on the IRA market. The agency expects to propose the controversial rule by the summer after backing off an initial proposal last year due to calls for more economic analysis. For more
see.
8. SEC warns advisers to keep good records of social media use handy
The SEC urged firms to pay particular attention to record-keeping requirements when they use social media and suggested that advisers have the records available for inspection. That guidance, issued in an
alert, was based on findings from SEC adviser examinations and followed a Jan. 4 enforcement order in which the commission alleged that an Illinois man was using social media to offer fictitious securities. Finra late last year backed away from a proposal that would have required broker-dealers to file social-media postings with the regulator. At least one state, Massachusetts, issued its own social media guidelines for its registered investment advisers using Facebook, LinkedIn and Twitter. For more on that,
see.
9. Coming soon, higher fees for large broker dealers
Large broker-dealers soon will have to pay higher fees to help finance the Public Company Accounting Oversight board, which oversees audits of the firms. The SEC approved a $227.7 million budget for the
board that included a 6% increase in PCAOB fees to enhance operations, including adding more auditors for broker-dealers. Broker-dealers with $5 million or more in net capital will be billed for $18.2 million of the fee hike, while the other $196.8 million will be paid by public companies that the board monitors. About 15% of the 4,656 broker-dealers registered with Finra had to pay the fee last year. For more,
see.
