Page 12 - Investment Advisor - November 2021

Beginnings

WASHINGTON WATCH

By Melanie Waddell

Auto-IRA Provision in House Tax Bill

Violates Securities Law: ASA

Also, SEC goes after leveraged ETFs, and NASAA releases new model rules.

The cost to establish a 401(k), the time
and complexity of compliance, the fidu-
ciary responsibility, and other obligations
would cause many small businesses with-
out sophisticated HR departments to vio-
late the bill’s mandate,” Iacovella said.
Also, businesses that would like to
establish a SIMPLE IRA or automatic IRA
“for their employees but cannot because
of technical legal flaws in the legislation
Representative Richard Neal, a Democrat from Massachusetts and chairman of the House could face a $10 per employee per day
Ways and Means Committee. penalty,” Iacovella wrote. “This outcome
would needlessly harm small businesses
he automatic IRA provision in out action by the account holder (in this and their workers across America.”
the House Ways and Means case, the employee of a small business).
TCommittee’s tax package This means SIMPLE and automatic IRA SEC CHIEF LAUNCHES PROBE OF
“directly conflicts with existing secu- plans cannot be opened automatically on COMPLEX ETPs
rities laws,” the American Securities behalf of an employee by an employer.” Securities and Exchange Commission
Association told House Ways and Means Subtitle B of the House Committee’s Chairman Gary Gensler said in early
Committee Chairman Richard Neal, Build Back Better legislation, H.R. 5376, October that he has directed agency
D-Mass., in early October. Iacovella told Neal, mandates that any staff to examine the potential risks of
“Subtitle B’s requirement that qualify- business with five or more eligible complex financial products that are list-
ing SIMPLE plans and Automatic IRA employees must offer an automatic retire- ed and traded on exchanges.
Arrangements be established by employ- ment plan. It also creates three acceptable “I also asked them to present rec-
ers without participation by the employee options of plans that businesses can offer: ommendations for the Commission’s
directly conflicts with existing securities 401(k) plans, SIMPLE IRAs, and auto- consideration on potential rulemaking
laws,” Chris Iacovella, ASA’s CEO, told matic payroll deduction IRA. proposals to address those risks, as part
Neal in a letter. “Current securities laws If a “technical fix” isn’t made to the of a broader look at exchange-traded
prevent an employer from establishing budget reconciliation legislation, it products,” Gensler said in a statement.
an IRA on behalf of an individual.” “would require small businesses to use Some ETPs use strategies and struc-
Securities rules also impose know- 401(k) plans as that would be the only tures that are more complex than typi-
your-customer, investment authorization, option available to them,” Iacovella wrote. cal stocks and bonds, Gensler warned. Stefani Reynolds/Bloomberg
dispute resolution and Regulation Best “While 401(k) plans are an excel- For instance, “leveraged ETFs” and
Interest requirements for IRAs, Iacovella lent option for some businesses, they “inverse ETFs.”
continued, “that cannot be satisfied with- are not appropriate for every business. “For more than a decade, SEC staff and

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