FIRMA Training Conference Anniversary Washington D C Regulatory

FIRMA Training Conference Anniversary Washington, D. C. Regulatory & Legislative Update Sally Miller ABA smiller@aba. com (202) 663 -5325 April 10, 2006

Mutual Funds Bank Brokerage Tax Pension Issues Other April 10, 2006 2

Mutual Funds Market Timing Late Trading April 10, 2006 3

Market Timing What is it? SEC response – Not mandatory – Up to 2% fee – Turnaround of 7 or more – Calendar days Compliance Date – 10/16/06 April 10, 2006 4

Rule 22 c-2 Fund required to have signed agreement with financial intermediary Financial intermediary – Bank that holds securities of record in nominee name – Participant directed employee benefit plan: retirement plan administrator or any entity that maintains plan records April 10, 2006 5

Model Contracts ICI/SIA SPARK Both negotiable April 10, 2006 6

SEC 2/28/06 Guidance Small intermediaries Intermediary chains Privacy issues/shareholder committees April 10, 2006 7

Inform customers? Defined benefit plans/charitable foundations Name of investment professional April 10, 2006 8

Late Trading SEC proposes “Hard 4” ABA/others object ABA/SPARK alternative – Fraud proof/time-stamping orders – Annual certifications – Annual audit – Supervisory oversight SEC is considering alternative April 10, 2006 9

Collective Funds Operational controls to monitor: – Admissions and withdrawals to deter opportunities to engage in late trading – Compliance with collective investment fund plan provisions regarding market timing April 10, 2006 10

Soft Dollars April 10, 2006 11

Gramm-Leach Bliley Act Implementation of Title II/Push-out provisions Loss of blanket exemption from brokerage registration April 10, 2006 12

Trust and fiduciary Custody Dual employee/compensation issues April 10, 2006 13

Trust and Fiduciary How do bank trust departments get paid? SEC focus – 12 b-1 fees – Transaction fees – Measure on an account-by-account level April 10, 2006 14

Custody Prohibition on order-taking Industry position – Non-negotiable – Limits: Flat, securities movement fee Advertising April 10, 2006 15

Compensation Commercial side of house: institutional and retail Nominal, one-time referral fee Impact on bonus plans April 10, 2006 16

Dual Employee Fix for compensation issues Host of other problems What are other banks doing? April 10, 2006 17

Status Broad opposition Delayed until 9/30/06 Bank industry: new proposal needed April 10, 2006 18

Estate Tax Phase-out by 2010 Repeal but carryover basis 2011, reverts to $1 million exemption (2002 level) April 10, 2006 19

Congressional Response House – complete and permanent repeal – Carryover basis Senate – compromise – $5 million exemption/15% tax rate – Step-up in basis April 10, 2006 20

Other Tax Issues Tax free contributions to charity from IRA Type III supporting organizations Dividend and capital gains tax rates April 10, 2006 21

Pension Issues 2001 Tax Act – Permanency – Deferral amounts: $15, 000/$5, 000 – Roth 401(k) – Portability – Catch-up provisions April 10, 2006 22

Other Pension Issues Investment advice Automatic enrollment Cash balance plans Prohibited transaction relief April 10, 2006 23

Taft-Hartley Plans LM-10 reporting requirements Bank exception April 10, 2006 24

Other FDIC insurance coverage – Raised to $250, 000 – Collateral requirements Entitlement Commission HSAs April 10, 2006 25

CONCLUSION April 10, 2006 26