Bush to Convene Summit on Financial Crisis.The White House announced that it has invited leaders of the G-20 nations to a summit in Washington, DC on November 15th. According to a White House statement, the summit will seek to find agreement on “a common set of principles for reform of the regulatory and institutional regimes for the world's financial sectors.” These principals would guide “working groups” that would flesh them out at subsequent summits. Also expected to attend the summit are the heads of the IMF and the World Bank, the United Nations Secretary-General, and the chairman of the Financial Stability Forum. White House Press Secretary, Dana Perino said the president-elect will also be welcome to attend. The summit follows recent efforts to coordinate a global response to the financial crisis, including greater cooperation among central banks.
Congress Approves $700 Billion Rescue Plan.Congress passed a financial rescue package, authorizing the Treasury Department to spend up to $700 billion to purchase mortgage-related assets and free up the credit markets. The plan is flexible enough that Treasury is using the first $250 billion to take equity positions in the nations banks, providing much needed liquidity.
FPA Backs Reserve Primary Fund Shareholders.On September 16th, The Reserve Primary Fund “broke the buck” leaving the clients of many FPA members in a bind. The fund has suspended redemptions pending liquidation, which is expected to begin this week. FPA has written to the SEC to emphasize the need for a fair and equitable distribution that balances the need for liquidity, as well as preserving the net asset value of the fund shares. Separately, FPA wrote to the Treasury Department, asking that it consider extending its Money Market Fund Guarantee Program to cover the fund, which would be ineligible for the program under current parameters.
FinCEN Withdraws Long-Outstanding Adviser AML Rule Proposal.The Financial Crimes Enforcement Network (FinCEN) has withdrawn a rule that was proposed more than five years ago that would have established anti-money laundering (AML) standards for investment advisers, unregistered investment companies and commodity trading advisors. Given the passage of time since the rule was originally proposed, FinCEN announced that it would not establish new AML these entities without first publishing new proposals and allowing for industry comments. FinCEN said it would continue to consider whether and to what extent it should impose new AML requirements on these entities.
FPA Urges Labor Department to Tighten Fiduciary Rules.In an Oct. 6th comment letter, the Financial Planning Association urged the Department of Labor to strengthen disclosure requirements for financial industry representatives offering investment advice to qualified plan participants and IRA account holders. FPA expressed concern about the ability of such advisers, who would be required to act as fiduciaries with respect to their investment advice, to cross-sell other products to plan participants without disclosing the change from fiduciary status. The Department of Labor is expected to adopt a final rule before the end of the year.
• Securities Issues
SEC Staff Working on Books and Records Update.In an October 29th speech before a compliance conference in Arizona, the director of the SEC’s Division of Investment Management, Andrew Donohue said his division may recommend that advisers be required to maintain some records electronically and on request produce searchable electronic records of trading data for managed accounts, among other things. Additionally, Donohue indicated that advisers could be required to keep more written communications, “such as correspondence regarding clients, advice, performance, compliance, commissions, and audits as well as correspondence to or from clients, regulators, marketers and broker-dealers.” SEC staff is actively working on a proposal which would require approval from the Commissioners before being put out for public comment.
SEC Reopens Comment Period on Indexed Annuities.After receiving hundreds of comments on its proposal to cover indexed annuities under federal securities laws, the SEC has extended to comment period on the proposal until November 17th. The Commission noted that it received numerous letters, including from state insurance commissioners and members of Congress, requesting that the comment period be extended. The extended comment period likely means no action will be taken on the proposed rule this year. FPA supported the proposal in its comment letter, highlighting the need for greater protection for consumers from unsuitable sales of annuities and from sales practice abuses.
• Federal Tax Issues
Congress Looks to Boost Flagging Economy.With GDP growth swinging negative, Congress plans to consider another economic stimulus package to boost the flagging economy. Congress will meet in a lame-duck session beginning on November 17. To date, discussions have focused on infrastructure spending, extending unemployment benefits, and providing tax breaks. While election results will affect the bill’s final contents, President Bush’s veto pen still gives him considerable negotiating power.
