FIRMA Training Conference Anniversary Washington, D.C. Regulatory & Legislative Update Sally Miller ABA (202)

April 10, Mutual Funds Bank Brokerage Tax Pension Issues Other

April 10, Mutual Funds Market Timing Late Trading

April 10, 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, Rule 22c-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, Model Contracts ICI/SIASPARK Both negotiable

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

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

April 10, 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, 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, Soft Dollars

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

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

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

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

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

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

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

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

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

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

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

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

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

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

April 10, CONCLUSION