Category: Company and Industry News

As we told you last week, the FEA was successful once again in pushing regulations through the Colorado House and Senate to provide consumer protection for those conducting 1031 like-kind exchanges in the state. The Governor signed HB09-1254 into law on 4/16/09.  Washington’s Governor signed a similar law on Monday, April 13.  Who next?  Texas? Maine? Arizona? Oklahoma?  The ideal goal is to maintain reciprocity between these states so that QIs can deliver consistent guidance and maintain reasonable standards for customers across the country.
Right now there are five states (CA, NV, ID, WA & CO) that have some form of qualified intermediary regulations on the books.  California took the lead by adopting regulations that provide exchangers certain levels of protection and requiring prudent investment standards ensuring liquidity and protection of principal.  Colorado recognized the importance of achieving consistency; it also understood the importance of safeguarding consumers while simultaneously protecting an industry that facilitates growth for Colorado companies.  Texas, Arizona, Oregon and Oklahoma are all leaning toward a model law that supports reasonable regulations, but Nevada and Idaho have passed regulations that are either very difficult to follow or aren’t business friendly at all.  It’s been two years since Nevada enacted their law and they still don’t have final guidance on how exchangers need to ensure compliance.  Now it seems that Maine wants to follow Idaho’s laborious, expensive and unrealistic standards, forcing QIs to complete reams of paperwork, provide background checks, register with the state and create very specific banking structures just to  provide a well established federal tax service to businesses in their state – all at a tremendous cost.
There will be more states, more laws, more dollars spent to accomplish  – in the end – the same result.  Encouraging your state to adopt model law is a good idea for everybody.  There’s no reason to reinvent the wheel.

As we told you last week, the FEA was successful once again in pushing regulations through the Colorado House and Senate to provide consumer protection for those conducting 1031 like-kind exchanges in the state. The Governor signed HB09-1254 into law on 4/16/09.  Washington’s Governor signed a similar law on Monday, April 13.  Who next?  Texas? Maine? Arizona? Oklahoma?  The ideal goal is to maintain reciprocity between these states so that QIs can deliver consistent guidance and maintain reasonable standards for customers across the country.
Right now there are five states (CA, NV, ID, WA & CO) that have some form of qualified intermediary regulations on the books.  California took the lead by adopting regulations that provide exchangers certain levels of protection and requiring prudent investment standards ensuring liquidity and protection of principal.  Colorado recognized the importance of achieving consistency; it also understood the importance of safeguarding consumers while simultaneously protecting an industry that facilitates growth for Colorado companies.  Texas, Arizona, Oregon and Oklahoma are all leaning toward a model law that supports reasonable regulations, but Nevada and Idaho have passed regulations that are either very difficult to follow or aren’t business friendly at all.  It’s been two years since Nevada enacted their law and they still don’t have final guidance on how exchangers need to ensure compliance.  Now it seems that Maine wants to follow Idaho’s laborious, expensive and unrealistic standards, forcing QIs to complete reams of paperwork, provide background checks, register with the state and create very specific banking structures just to  provide a well established federal tax service to businesses in their state – all at a tremendous cost.
There will be more states, more laws, more dollars spent to accomplish  – in the end – the same result.  Encouraging your state to adopt model law is a good idea for everybody.  There’s no reason to reinvent the wheel.

Multiple states have recently passed laws regulating Qualified Intermediaries, and we’ve now made the text of these bills available for download.
Below is the Federation of Exchange Accommodators statement on the California bill’s passage:

CALIFORNIA QI BILL ENACTED INTO LAW
October 2, 2008
The Governor of California signed SB 1007 into law and a copy of the new law is attached. We believe that this represents a victory for the FEA and the QI industry. Many FEA members worked hard to get the law into a form that would accomplish the goal of providing consumer protection to exchangers without unduly burdening the QI industry.
The provisions of the new law will be effective for all exchanges after January 1, 2009. Therefore, you should review the requirements to be sure that your company is in compliance if you do business in California.
What does the law provide? The California law does not provide for registration or licensing, but does provide for insurance and investment standards for exchange facilitators. The major provisions of California bill are as follows:
1. Application. The law applies to all exchange facilitators considered to be “doing business in California”. “Doing business” means the relinquished property in the exchange is located in California, or the EAT holds title to property in California. It also applies to someone who maintains an office in California or advertises in California provided the relinquished property is in California.
2. Insurance, Bonding and/or Security Requirements. Exchange facilitators must:
(A) (1) maintain a fidelity bond of at least $1,000,000, OR (2) deposit cash, securities or a letter of credit for at least $1,000,000, OR (3) use a qualified escrow or trust; AND
(B) (1) maintain errors and omissions insurance of at least $250,000, OR (2) deposit cash, securities or a letter of credit letter in that amount.
3. Investment Standards. Exchange facilitators must act as a custodian of the exchange funds and meet the “prudent investor” standard in the investment of funds, and satisfy investment goals of liquidity and preservation of principal. The exchange facilitator cannot comingle exchange funds with operating accounts, or loan or transfer funds to an affiliate (other than to an affiliate financial institution or to an exchange accommodation titleholder pursuant to the exchange contract).
4. Prohibited Acts. Exchange facilitators must not engage in various bad acts, such as material misrepresentations, false advertising, failure to account for moneys or property, failure to return exchange funds to clients, fraud, criminal conduct, etc.
5. Notification of Change of Ownership. Exchange facilitators must notify clients in writing within 10 days after a change in ownership (more than a 50% change).

Multiple states have recently passed laws regulating Qualified Intermediaries, and we’ve now made the text of these bills available for download.
Below is the Federation of Exchange Accommodators statement on the California bill’s passage:

CALIFORNIA QI BILL ENACTED INTO LAW
October 2, 2008
The Governor of California signed SB 1007 into law and a copy of the new law is attached. We believe that this represents a victory for the FEA and the QI industry. Many FEA members worked hard to get the law into a form that would accomplish the goal of providing consumer protection to exchangers without unduly burdening the QI industry.
The provisions of the new law will be effective for all exchanges after January 1, 2009. Therefore, you should review the requirements to be sure that your company is in compliance if you do business in California.
What does the law provide? The California law does not provide for registration or licensing, but does provide for insurance and investment standards for exchange facilitators. The major provisions of California bill are as follows:
1. Application. The law applies to all exchange facilitators considered to be “doing business in California”. “Doing business” means the relinquished property in the exchange is located in California, or the EAT holds title to property in California. It also applies to someone who maintains an office in California or advertises in California provided the relinquished property is in California.
2. Insurance, Bonding and/or Security Requirements. Exchange facilitators must:
(A) (1) maintain a fidelity bond of at least $1,000,000, OR (2) deposit cash, securities or a letter of credit for at least $1,000,000, OR (3) use a qualified escrow or trust; AND
(B) (1) maintain errors and omissions insurance of at least $250,000, OR (2) deposit cash, securities or a letter of credit letter in that amount.
3. Investment Standards. Exchange facilitators must act as a custodian of the exchange funds and meet the “prudent investor” standard in the investment of funds, and satisfy investment goals of liquidity and preservation of principal. The exchange facilitator cannot comingle exchange funds with operating accounts, or loan or transfer funds to an affiliate (other than to an affiliate financial institution or to an exchange accommodation titleholder pursuant to the exchange contract).
4. Prohibited Acts. Exchange facilitators must not engage in various bad acts, such as material misrepresentations, false advertising, failure to account for moneys or property, failure to return exchange funds to clients, fraud, criminal conduct, etc.
5. Notification of Change of Ownership. Exchange facilitators must notify clients in writing within 10 days after a change in ownership (more than a 50% change).

Multiple states have recently passed laws regulating Qualified Intermediaries, and we’ve now made the text of these bills available for download.
Below is the Federation of Exchange Accommodators statement on the California bill’s passage:

CALIFORNIA QI BILL ENACTED INTO LAW
October 2, 2008
The Governor of California signed SB 1007 into law and a copy of the new law is attached. We believe that this represents a victory for the FEA and the QI industry. Many FEA members worked hard to get the law into a form that would accomplish the goal of providing consumer protection to exchangers without unduly burdening the QI industry.
The provisions of the new law will be effective for all exchanges after January 1, 2009. Therefore, you should review the requirements to be sure that your company is in compliance if you do business in California.
What does the law provide? The California law does not provide for registration or licensing, but does provide for insurance and investment standards for exchange facilitators. The major provisions of California bill are as follows:
1. Application. The law applies to all exchange facilitators considered to be “doing business in California”. “Doing business” means the relinquished property in the exchange is located in California, or the EAT holds title to property in California. It also applies to someone who maintains an office in California or advertises in California provided the relinquished property is in California.
2. Insurance, Bonding and/or Security Requirements. Exchange facilitators must:
(A) (1) maintain a fidelity bond of at least $1,000,000, OR (2) deposit cash, securities or a letter of credit for at least $1,000,000, OR (3) use a qualified escrow or trust; AND
(B) (1) maintain errors and omissions insurance of at least $250,000, OR (2) deposit cash, securities or a letter of credit letter in that amount.
3. Investment Standards. Exchange facilitators must act as a custodian of the exchange funds and meet the “prudent investor” standard in the investment of funds, and satisfy investment goals of liquidity and preservation of principal. The exchange facilitator cannot comingle exchange funds with operating accounts, or loan or transfer funds to an affiliate (other than to an affiliate financial institution or to an exchange accommodation titleholder pursuant to the exchange contract).
4. Prohibited Acts. Exchange facilitators must not engage in various bad acts, such as material misrepresentations, false advertising, failure to account for moneys or property, failure to return exchange funds to clients, fraud, criminal conduct, etc.
5. Notification of Change of Ownership. Exchange facilitators must notify clients in writing within 10 days after a change in ownership (more than a 50% change).