More than 50 financial advisers, fund managers, accountants, and attorneys attended an educational and networking event co-sponsored by Practus, LLP and accounting firm BBD LLP last month, with support from the Chartered Alternative Investment Analyst Association (CAIA).
Partners Robert Elwood, John Grady, and John Ramírez spoke about topics related to funds, taxes, advisers, and brokers that will be important in 2020 and beyond.
With a specialty in tax and transactional law, Bob Elwood covered cryptocurrencies and the increasing attention being paid to them by the IRS. He explained that cryptocurrencies are treated as property, not currency, for tax purposes. Accordingly, all transactions are taxable and come with stringent reporting requirements. Fund managers should be aware that the IRS is making tax enforcement of cryptocurrencies a high priority and carefully consider the use of altcoins in mutual funds. They are, however, excellent assets for retirement accounts because the tax reporting is deferred to the time of distribution. Contact Bob Elwood for more information about the taxation of cryptocurrencies.
John Grady, who specializes in securities law and interval funds in particular, shared that the prevalence of non-listed interval funds is increasing due to, among other things, the liquidity the structure can provide for alternative investment strategies. Interval funds can be attractive vehicles for use by broker-dealers, investment advisers, and other financial professionals because they often mesh well with certain regulatory initiatives. Contact John Grady for a copy of his interval funds whitepaper.
John Ramírez, also a securities specialist, informed the audience that recent SEC exams have focused on fund disclosure and the accuracy of performance, fee, and expense figures presented in prospectuses. In addition to the continued focus on disclosures and calculations, funds and advisers can expect the SEC to look at cybersecurity, digital assets, anti-money laundering programs in 2020, as well as compliance with new rules and guidance related to ETFs, derivatives, securities lending, and Regulation Best Interest. Contact John Ramírez to learn more about SEC regulations and compliance.
Other key insights for 2020 included:
- Retirement savings: Employees in 401(k) plans will be able to contribute up to $19,500 — an increase of $500 from 2019. Additionally, the catch-up contribution limit for employees who are age 50 and over is increased from $6,000 to $6,500.
- Advertising rules: Under the proposed rule changes, advisers could use testimonials, endorsements, and third-party ratings, subject to certain conditions.
- Testing the waters: Effective December 3, 2019, the SEC expanded the permissible use of oral and written communications to qualified institutional buyers and institutional accredited investors to gauge investors’ interest in an offering.
The event was held at Fleming’s Prime Steakhouse and Wine Bar in Radnor, PA. Following the educational portion of the evening, guests attended a lively networking reception complete with a signature cocktail aptly named “2020 Starting Line.” If you would like to receive information about the next Practus event, please contact Athena Anthopoulos.
