Policy/Legislation
Democrats Take Aim at Accredited Investors: ThinkAdvisor reports that part of the tax package proposed by the House Committee on Ways and Means would limit the ability of IRA and retirement account holders to invest in certain alternative assets that are often associated with wealthy and sophisticated investors. However, in their efforts to curtail some of the strategies used by the ultra-rich, the Democratic proposal would limit the ability of smaller investors, to fully diversify their retirement accounts with alternatives and private investments and will also hurt many middle- and upper-middle-class investors. ADISA strongly opposes this proposal.
As The DI Wire reports, ADISA, the Institute for Portfolio Alternatives, and other industry trade groups have submitted comment letters to various U.S. House of Representatives members in opposition to the proposal to prohibit holding alternative investments in an individual retirement account. The proposal, Section 138312 in the Ways & Means Amendment to the Budget, would prohibit IRA investments from including publicly issued securities such as non-traded real estate investment trusts, business development companies, and other private offerings. ADISA and the IPA are encouraging their members to write their representatives and senators asking that this provision be removed from consideration.
Little Progress Reported on Massive Tax and Spend Bill: Roll Call reports that as the Senate started a weeklong recess, Democrats showed little sign they were making progress on their economic agenda. Enactment of a government funding stopgap through Dec. 3 and the $480 billion debt ceiling boost that will punt the deadline for another increase by a few months will allow the Democrat-controlled Congress to spend the remainder of the fall focused on passing President Joe Biden’s social and climate spending and tax package. But as Democratic leaders eye an end-of-month deadline for passing the sweeping package through the filibuster-proof budget reconciliation process, the party has yet to agree on a framework for a scaled-down version of the bill that both moderate and progressive Democrats can support.
Treasury Secretary Confident of Global Minimum Tax: Reuters reports that Treasury Secretary Janet Yellen says she is confident Congress would approve legislation to implement the 15 percent global corporate minimum tax agreed by 136 countries. Yellen said Sunday the actions to bring the United States into compliance with the global minimum tax would likely be included in the so-called reconciliation budget bill containing President Joe Biden’s proposed tax and spending initiatives. The Organization for Economic Cooperation and Development-brokered deal is aimed at stopping international corporations from slashing tax bills by registering in nations with low rates. Treasury officials and some tax experts have said that the global minimum tax would not require a treaty to implement and could be achieved in the reconciliation bill because it is a voluntary agreement among countries to individually impose a minimum tax on overseas earnings of corporations. Senate Republicans have argued that this would require a new international tax treaty that would require ratification with a two-thirds Senate majority.
Federal Tax Revenues Booming, Rich Paying More: Politico reports that federal tax receipts are booming, despite a pandemic, a recession and a slew of tax cuts. Revenues jumped 18 percent in the fiscal year that just ended, analysts say — the biggest one-year increase since 1977. That translates into $627 billion more than in 2020, according to the nonpartisan Congressional Budget Office, which estimates that, for the first time, total government revenues topped $4 trillion. Though Democrats are hammering the rich, the increase is being driven by levies primarily paid by the well-to-do. For example, corporate tax receipts leapt 75 percent, CBO says. At $370 billion, they easily top where they were immediately before Republicans slashed the corporate rate in 2017 as part of the Tax Cuts and Jobs Act.
House Clears Two-Month Debt Limit Extension: The Wall Street Journal reports that earlier this week the House voted along party lines 219-206 to raise the U.S. borrowing limit into early December. House Speaker Nancy Pelosi (D-CA) called the House back from a recess to pass the debt-ceiling increase that passed the Senate last week. Treasury Secretary Janet Yellen had warned House Democratic leaders that if the chamber failed to act this week, the U.S. wouldn’t be able to pay its bills. Congress faces the same fiscal cliff again in December.
Regulation
SEC Stresses ‘Proactive Compliance’ on Reg BI: InvestmentNews reports that financial firms must be ‘proactive’ in aligning compliance practices to meet emerging risks and Securities and Exchange Commission investor protection priorities, says the agency’s new enforcement chief. Gurbir Grewal, director of the SEC’s Division of Enforcement, used the broker-dealer standard of conduct, Regulation Best Interest, as an example of how firms must tailor their compliance programs to fit their business models and investment products. Grewal warned firms not to just to go through the motions and check compliance off their to-do lists but rather to strive for excellence in adhering to rules and regulations. “Let me be clear here: I am talking about more than putting together a stock policy and giving a check-the-box training,” Grewal said. “This requires proactive compliance.”
Reg BI to Be Folded Into Regular SEC Exams: ThinkAdvisor reports that the SEC will be incorporating compliance with Regulation Best Interest into its regular exams, John Polise, associate director of the SEC’s Broker-Dealer and Exchange Oversight, said Tuesday. After completing Phase 1 and 2 of Reg BI exams, the “good news is there’s not going to be a Phase 3,” Polise said during the Practising Law Institute’s SEC Speaks event. However, that doesn’t mean that Reg BI exams are going away. “What we’re working on now is we have a high level of fluency in our program of using Reg BI and we believe the registrants have an understanding of what we expect regarding Reg BI so we’ll be integrating it into our regular program and regular exams,” Polise said. “You may not get a ‘Reg BI exam,’” he continued, “but you may have Reg BI components in other exams.”
SEC Chair Gensler Has Ambitious Agenda: ThinkAdvisor reports that SEC Chair Gary Gensler is laying out one of the most ambitious agendas in the SEC’s 87-year history — some 49 proposals, many already drawing opposition from hedge funds, stock exchanges, online brokers and public companies. He’s been similarly aggressive on agency enforcement cases, which can tank share prices, spur fines and trigger embarrassing publicity. Gensler says he’s confident the SEC can move ahead on many issues at once. Gensler has set up some 50 teams involving about 200 people to write rule proposals. Each has staff from the general counsel’s office as well as economists to carefully weigh the costs and benefits, a key requirement of federal law. He is keeping close tabs on the progress; the groups have been directed to send regular updates to the chair’s office on the state of play.
ESG Funds Easier to Buy Under Labor Department Plan: The Wall Street Journal reports that the U.S. Department of Labor on Wednesday proposed a rule that would make it easier for investors to purchase funds focused on environmental, social and governance measures in their retirement plans. The proposal would reverse a Trump administration rule making it harder for retirement plans to offer investments based on environmental, social and governance, or ESG, measures. The Biden administration proposal will enter a 60-day comment period.
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