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Regulation R What Now?

Regulation R What Now?. Kathryn Vest 2012 FIRMA Conference. Back to the basics. Trust & Fiduciary Exemption Compensation calculations are being done. Permissible gyrations Accounts open < 3 months De minimis accounts Bank versus account-by-account Still over 90%?? 95%?

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Regulation R What Now?

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  1. Regulation RWhat Now? Kathryn Vest 2012 FIRMA Conference

  2. Back to the basics • Trust & Fiduciary Exemption • Compensation calculations are being done. • Permissible gyrations • Accounts open < 3 months • De minimis accounts • Bank versus account-by-account • Still over 90%?? 95%? • Have you checked your inputs? Are you picking up any new compensation schemes?

  3. Back to the basics • Safekeeping & custody exemption • Employee & entity compensation • Investment advice restriction • Money market mutual fund sweep exemption • Load vs. No load funds • Networking Exemption • Nominal & higher-than-nominal options • Details, details

  4. What’s old is new again! • No regulatory guidance or interpretation, as promised! • No change to the regulations…no commentary…no major findings.

  5. What’s missing? • Further clarification & definitions • Non-relationship compensation • Accommodation trades • Advertising restrictions • Bank referrals routed through dual employees

  6. Building a Referral ProgramWhere are the compliance risks? • After a round of golf, a new to small town broker/dealer approaches a trust company president about acting as a referral source. • Trust company president thinks his employees would react well to the potential added income so he says yes. • The broker/dealer is willing to pay $35 for each referral that results in a sale. • Each trust advisor receives a beach ball and $25 gas card after their first referral.

  7. Building a referral program,continued • Plus, for each of the 3 trust company branches, the broker/dealer will award $100 to the branch manager whose branch makes 10 or more referrals. • Would it help if the trust advisors and/or client support staff were licensed with the broker/dealer? • Could trust company branch managers still get the $100 promised?

  8. Building a referral program,continued • Could the broker/dealer invite trust company employees (not licensed) to an educational seminar? • What if they have to pass along a certain number of referrals to qualify for the seminar to be held in Cancun?

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