1. Washington and Regulatory Update Iowa Trust Association Conference Thursday, October 2, 2014 Phoebe Papageorgiou American Bankers Association aba.com 1-800-BANKERS

2. One Year Later… IRS Guidance on Trustee Fees Dodd Frank Act Rulemaking Fiduciary and Investment-Related Developments

3. aba.com 1-800-BANKERS IRC 67(e) Final Rule General Rule: cost subject to 2% floor if – 67(b) itemized miscellaneous deduction, – Incurred by an estate & non-grantor Trust, and – “commonly” or “customarily” incurred by an individual The type not the description of a product or service is determinative of whether it is commonly or customarily incurred

4. aba.com 1-800-BANKERS IRC 67(e) Final Rule Ownership costs subject to 2% floor – condo fees, insurance premiums, certain partnership costs Tax prep fees not subject to the 2% floor – estate and GST tax returns, fiduciary income tax returns, and decedent’s final 1040 Tax prep fees subject to the 2% floor – all other tax returns

5. aba.com 1-800-BANKERS IRC 67(e) Final Rule General Rule: Investment Advisory Fees Subject to 2% Floor Exception for incremental fees: – Added solely because advice rendered to trust or estate – For unusual investment objective – For specialized balancing of the interests of various parties (beyond the usual balancing of the varying interests of current beneficiaries and remaindermen) Exception is limited to portion of fee that exceeds that which an individual normally incurs

6. aba.com 1-800-BANKERS IRC 67(e) Final Rule Allocation Requirement for “Bundled” Fee – Components of fee must be allocated properly between that which is subject to 2% floor and that which is not Exception – If fee not computed on an hourly basis, only portion of fee that is attributable to investment advice is subject to the 2% floor

7. aba.com 1-800-BANKERS IRC 67(e) Final Rule, Cont. Important Note: Rule only applies to the taxation of trusts/estates. Does not otherwise regulate or affect fiduciary fees Amended Effective Date: Tax years starting on or after January 1, 2015

8. aba.com 1-800-BANKERS SEC Money Market Fund Final Rule 8 TypeNAV Permissible Investors Liquidity Fees/Redemption Rules Apply? Government Funds StableAll Permissible, not required Retail Prime Funds Stable Retail Investors (i.e., “beneficial owners” are natural persons) Yes Institutional Prime Funds FloatingAll Yes

9. aba.com 1-800-BANKERS SEC Money Market Fund Final Rule Omnibus Investments in Retail MMMFs: Funds must have policies/procedures reasonably designed to limit beneficial owners to natural persons Fund and intermediaries may engage in contractual arrangements or periodic certifications to meet the eligibility rules Intermediaries subject to liability for violations of “federal securities laws, including the antifraud provisions, where institutional investors are improperly funneled into retail funds.” 9

10. aba.com 1-800-BANKERS SEC Money Market Fund Final Rule Rules for Liquidity Fees and Redemption Gates Apply to all Prime Funds. Permissible for Government Funds If less than 30% of total assets in weekly liquid assets (WLA): – Discretionary Liquidity Fee of up to 2% on redemptions – Suspension of redemptions allowed up to 10 days If less than 10% of total assets in WLA – Default Liquidity Fee of 1% on redemptions 10

11. aba.com 1-800-BANKERS SEC Money Market Fund Final Rule New diversification and disclosure rules for MMMFs. IRS tax reporting relief for FNAV MMMFs Compliance Dates – Diversification/disclosure: 4/14/15 – FNAV and Fees/Gates: 10/14/16 11

12. aba.com 1-800-BANKERS Municipal Advisor Final Rule Must register if advising municipal entity on: – issuance of municipal securities or – municipal financial products (e.g., investment of proceeds of municipal securities) SEC FAQs MSRB Proposals: Fiduciary duty; Professional qualifications; Supervision/Compliance Registration Deadline was July 1, 2014

13. aba.com 1-800-BANKERS Volcker Final Rule Generally regulates Banking Entity’s proprietary trading and sponsorship/ownership of “Covered Funds” Exceptions for certain activity on behalf of fiduciary customers Definitions/Interpretations : What is a “Banking Entity,” “Covered Fund,” an “Illiquid Fund”? ABA Focus: examiner guidance; interpretive guidance/authority

14. aba.com 1-800-BANKERS OCC Bulletin on Vendor Management Responsibility of board and senior management: ensure that 3 rd party activity is performed in safe and sound manner and in compliance with applicable laws Elements of Appropriate Risk Management – Proper due diligence in selecting a third party – Monitoring of third party’s activities and performance – Independent reviews of risk management process Vendors include tax software/preparation companies, RIAs, appraisers

15. aba.com 1-800-BANKERS Latest Uniform Law Developments Uniform Fiduciary Access to Digital Assets Act – expected to be approved this summer Trust Decanting Drafting Committee Trust Protector Study Committee

16. aba.com 1-800-BANKERS ABA Comments on OCC Regulation 9 Letter to OCC on Part 9 as part of the EGRPRA Review Recommended ways to modernize rules and provide reasonable relief Specific Comments on – 9.8, Recordkeeping – 9.10, Fiduciary Funds Awaiting Investment or Distribution – 9.13, Custody of Fiduciary Assets – 9.14, Deposit of Securities with State Authorities – 9.18, Collective Investment Funds

17. aba.com 1-800-BANKERS Questions? Phoebe Papageorgiou phoebep@aba.com