TOP NEWS

Retirement Security Legislation Status in Congress

Following a week of numerous deadlines, a brief rundown on the status of what happened on Capitol Hill is below:

  • Government Funding: On Thursday, the Senate and House passed, and the President signed a continuing resolution (CR) to keep the government funded through December 3.
  • Debt Limit: The Senate failed to adopt the House-passed measure to suspend the debt ceiling through December 16, 2022. The Secretary of the Treasury estimates that the deadline for resolution before the United States defaults on its obligations is around October 18, 2021.
  • Infrastructure Bill: The Senate-passed, bipartisan infrastructure bill was not considered in the House due to continued divisions between moderate and progressive Democrats on reaching an agreement on the reconciliation package. Without that agreement, House progressives will not vote in favor of the infrastructure bill. The infrastructure bill will likely be considered at the same time an agreed upon revised reconciliation bill will be considered.
  • Reconciliation Package: A new round of negotiations between the White House, the House and Senate Democrat leadership is beginning following their failure to come to an agreement which will have garnered enough votes to pass the bill in both chambers of Congress last week. The negotiations are centered on agreeing to a framework of the specific policies and programs to include in the bill which will have a reduced price tag of what is now expected to be somewhere between $1.5 trillion to $2.1 trillion. The Speaker of the House Nancy Pelosi (D-CA) has said that the target to reach that agreement by October 31.

As the reconciliation package is negotiated, IRI remains cautiously optimistic that the Automatic IRA/Retirement Plan measure will remain in the package given it has had support from the White House and moderate and progressive Democrats. However, there is a chance it could be dropped from the package due to a reduction in the total cost of the package and competing priorities.  The passage of a CR to fund the government through December could create an opportunity for the SECURE 2.0 package to be considered for inclusion in an end-of-year omnibus funding bill. IRI is working to continue to educate policymakers about why the Automatic IRA/Retirement plan measure should remain in the reconciliation bill and will continue to advocate for the enactment of the proposals in the 2021 Federal Retirement Security Blueprint.

Any questions should be referred to Paul Richman.

LEGISLATIVE NEWS

Senate HELP Schedules EBSA Assist. Secretary Nominee Hearing

The Senate Committee on Health, Education, Labor, and Pensions (HELP) has scheduled a confirmation hearing for President Biden’s nominee to serve as Assistant Secretary of Labor for Employee Benefits Security, Lisa Gomez, for Thursday, October 7, at 10:00 a.m. Gomez is currently a partner at Cohen, Weiss, and Simon in New York, where she chairs the firm’s management committee. According to Cohen. Weiss, and Simon’s website, Gomez’s practice encompasses representing and advising “a federal employee health benefit plan, various multiemployer pension and welfare plans, single employer plans, and jointly administered training program trust funds, as well as plans sponsored by unions for their internal staff. […] She also advises plans on plan design and administration, benefit claims and fiduciary issues, delinquency collection, participant communications, service provider agreements and qualified domestic relations orders and represents them in various types of litigation.”

IRI will monitor the hearing and provide an update in the next edition of GAU.

Any questions should be referred to John Jennings.

SEC Chairman to Appear Before House Financial Services Committee

On October 5 at 12:00 p.m. the House Committee on Financial Services will conduct an oversight hearing of the Securities and Exchange Commission (SEC), with SEC Chairman Gary Gensler as the sole witness. According to the memorandum announcing the hearing, the Committee will cover a range of issues before the SEC including gamification, digital assets, regulation of cryptocurrencies, and environmental, social, and governance (ESG) disclosures. Several proposed pieces of legislation have also been included in the memorandum, including proposals that would provide reliable funding to the SEC’s Office of Investor Advocate, establish minimum listing standards for stock exchanges relating to corporate governance, whistleblower protections, prohibitions on recommending SPACs that “grant high percentage of ‘promote’ to sponsors to retail investors, and additional grant moneys to enhance protections of senior investors.

IRI will monitor the hearing and provide an update in the next edition of GAU.

Any questions should be referred to John Jennings.

Senate Commerce Committee Examined Data Privacy during Hearing

The Senate Committee on Commerce held a hearing on September 29 entitled “Protecting Consumer Privacy” to examine “how to better safe guard consumer privacy rights” through the possible creation of a privacy bureau at the Department of Commerce and comprehensive federal law. Committee Chairwoman Maria Cantwell (D-WA) noted that 140 million people have been impacted by data breaches a year for the last five years and that she cosponsored the Consumer Online Privacy Rights Act in 2019 which would establish a privacy bill of rights, create new data security protections, offer consumers a private right of action, and enable the Federal Trade Commission to enforce and modify the law as technology evolves. The Committee’s leading Republican, Senator Roger Wicker (R-MS), used his opening statement to call for national data privacy law and highlighted the SAFE DATA Act, which was introduced in July as a “starting point to resume negotiations” with his colleagues on the committee. Historically, Democrats and Republicans have agreed that federal data privacy legislation is necessary but disagree on enforcement mechanisms and whether to leave room for more stringent state law to build on federal standards or not. IRI will continue to monitor negotiations on data privacy legislation.

Any questions should be referred to John Jennings.

REGULATORY NEWS

 

IRI Submits Comments on SEC’s RFI on Digital Customer Engagement Practices

 

IRI submitted comments to the SEC on October 1, in response to its Request for Information (RFI) on digital customer engagement practices (DEPs) of broker-dealers and investment advisers. The RFI is primarily focused on DEPs such as behavioral prompts, differential marketing, and game-like features (commonly referred to as “gamification”), as well as analytical and technological tools used in connection with these DEPs and the use of technology to develop and provide investment advice.

 

IRI’s letter seeks to distinguish IRI’s members’ use of DEPs from firms like Robinhood that engage directly with and market to retail investors without the involvement of financial advisors. Based on feedback from our Ops & Tech community, we understand that IRI members generally do not use DEPs in order to side-step a financial advisor. In addition, our letter sets forth that the SEC and other regulators should not make any changes to the definition or interpretation of the term “recommendation.” Reg BI and related rules and guidance from the SEC and FINRA, as well as existing statutory mandates under the Investment Advisers Act already provide sufficient investor protection with respect to DEPs and sufficient clarity as to the difference between “education” and “recommendations.” Any changes to this well-established framework would have a chilling effect on our members’ ability to produce, distribute and advance educational materials related to investments generally, and the use of DEPs, specifically.

 

Any questions should be referred to Emily Micale.

 

IRI Signs on to Joint Trades Comment Letter to IRS Seeking Permanent Relief for Remote Witnessing Procedures

 

In response to the request for comments included in Notice 2021-40, IRI along with several of our sister trade associations, submitted a comment letter to the IRS to reiterate our request for the IRS to make permanent its temporary relief from the physical presence requirement for spousal consents, as originally announced in Notice 2020-42 and extended by Notice 2021-03 and Notice 2021-40. The joint trades believe set forth that permanent relief is warranted, even as the pandemic abates. Further, the joint trades argued that such permanency should be made available without the need for a formal rulemaking process.

 

The joint trades based its conclusions on some key factors in our industry, the markets and evolving post-pandemic business operations. The letter highlighted that permanent relief is warranted based on both additional security and convenience. The joint trades also pointed out the changing nature of work and remote working arrangements, and IRS Commissioner Rettig’s public support for remote witnessing. During a March 18, 2021, House Ways and Means Committee hearing, Commissioner Rettig said that he was a “huge advocate” for making these rules permanent and expressed his belief that remote online notarization is a service that taxpayers “deserve.” Commissioner Rettig also stated that he was not aware of any issues that would cause the Service to not make its relief permanent.

 

Additionally, the joint trades letter noted the IRS should honor state notarial standards, there is no need to establish additional procedures as adequate safeguards are in place, and to reiterate, permanent relief does not require regulatory amendments.

 

Any questions should be referred to Emily Micale.

 

Montana Adopts Rules Implementing NAIC Model Annuity Suitability Disclosure Forms

 

The Commissioner of Securities and Insurance, Office of the Montana State Auditor (CSI) has adopted rules incorporating the disclosure forms in the Appendices A through C of the NAIC Model and providing guidance for approval of the training consistent with the NAIC Model. IRI submitted a comment letter in support of the rules, which were adopted as proposed.

 

Any questions should be referred to Sarah Wood.

IRI Presenting at Next NAIC E-Commerce Working Group Meeting

At the request of the NAIC, IRI will be presenting at the next NAIC E-Commerce Working Group meeting on October 7 on the operational and technological challenges that our members are facing in this area. While we are still exploring whether we can identify specific regulatory changes/updates that might be needed, we are also considering whether to recommend or request that the NAIC develop model guidance or a bulletin for the individual states to issue that would validate and confirm that industry practices using modern technology are permitted under applicable state laws and rules. The goal will be to get confirmation that operating in the modern world is consistent with our regulatory obligations.

Any questions should be referred to Sarah Wood.

FINRA Files Proposed Rule Change to Amend FINRA Rule 2231 (Customer Account Statements)

On September 29, FINRA filed a proposed rule change with the SEC to amend its Rule 2231, relating to customer account statements. Per FINRA’s release, the proposed rule change is to amend Rule 2231 (Customer Account Statements) to add new supplementary materials pertaining to compliance with Rule 4311 (Carrying Agreements), the transmission of customer account statements to other persons or entities, the use of electronic media to satisfy delivery obligations, and compliance with Rule 3150 (Holding of Customer Mail). Further, the proposed rule change incorporates without substantive change specified provisions derived from Temporary Dual FINRA-NYSE Rule Interpretation 409T (Statements of Accounts to Customers) pertaining to information disclosed on customer account statements, externally held assets, use of logos and trademarks, and use of summary statements. Finally, the proposed rule change seeks to delete Temporary Dual FINRA-NYSE Rule 409T (Statements of Accounts to Customers) and Temporary Dual FINRA-NYSE Rule Interpretation 409T.

It is our understanding that this proposal related to how written consent for e-delivery can be realized when the customer to whom the account statements are address are infirm or incapable of making legal and/or financial decisions. The SEC has held a long-standing position that powers of attorney (POAs) where the customer has a legally authorized representative to handle their legal and financial affairs are rife with fraud. A member has requested IRI to consider drafting comments in response to this proposed rule change, to specifically argue for an exception to the general rule allowing a duly authorized customer representative, with a valid POA to elect to receive customer account statement and communications electronically and directed to their attention.

Additionally, there is a concern about the effective date of this proposed rule change to FINRA Rule 2231. Generally, a rule change such as this proposal takes effect 365 days from the date of publication as a regulatory notice. The concern expressed was that the SEC could shorten the effective date period to as little as 60-90 days.

We welcome member comments and concerns on this FINRA proposed rule change, and our Securities Committee will discuss it in more depth on our October monthly committee call.

Any questions should be referred to Emily Micale.

FINRA, NASAA and SEC OIEA Urge Investors to Establish a Trusted Contact to Increase Investor Protection

On September 28, securities regulators joined together in a press release where FINRA, NASAA, and the SEC’s Office of Investor Education and Advocacy (SEC OIEA) announced a new joint initiative urging investors to provide their financial firms with a trusted contact. The press release defines a “trusted contact” as “an individual authorized by an investor to be contacted by their financial firm in limited circumstances, such as concerns about activity in the investor’s account or if the firm has been unable to reach the investor after numerous attempts. A trusted contact may be a family member, attorney, accountant or another reliable third party; investors may establish more than one trusted contact and may add or change a trusted contact at any time.”

Financial firms are encouraged to share campaign resources with investors, and investors are encouraged to review the materials, ask questions, and contact their firm to name a trusted contact. All the campaign’s resources can be found on www.finra.org/trustedcontact.

IRI will continue to monitor this new joint initiative, we welcome members comments and concerns, and will address the issues involved on our next Securities Committee monthly call.

Any questions should be referred toEmily Micale.