Industry-leading Advocacy Work Continues to Maintain and Modernize Market for Portfolio Diversifying Investments
As we approach the end of what has been one of our busiest policy advocacy years of the past decade, we want to take a moment to share an update on our activities in the second half of the year and highlight our continuing policy priorities.
Key Q3 & Q4 Regulatory & Policy Advocacy Efforts
- Build Back Better Framework – IRA Provision 138312: On September 15, upon learning of this provision, the IPA sent a letter in partnership with three other trade groups to House Ways & Means Committee Chairman Richard Neal (D-MA) strongly urging the Committee to take a closer look at the unintended consequences of Section 138312, which would prevent investor access to alternative products through tax-advantaged retirement accounts, and its impact on everyday retirement savers. The IPA organized weeks of close contact with senior tax staff of Chairman Neal and Senate Finance Committee Chairman Ron Wyden (D-OR) as well as senior legislators of both committees. We also generated more than 5,000 letters to Members of Congress through our grassroots tool, and engaged a broad coalition of affected groups and businesses. In addition, Tony spoke at length directly with Chairman Neal about this provision. As a result of these efforts, the House leadership announced the provision was dropped from the Build Back Better Act (BBB) announced on October 28. On November 5, the House passed the rule that set the base text for the BBB that did not contain the provision. While our work is far from complete, we are incredibly pleased with the outcome.
- 1031 Like-Kind Exchange Preservation: Thanks to the work of our members and coalition partnersthroughout 2021, 1031 like-kind exchanges have, thus far, not been offered as a potential pay for in the BBBA. Since the Biden Administration initially proposed changes to Section 1031 in March, the IPA and our coalition has worked tirelessly to oppose any limitation to like-kind exchanges. Following our 1031 Advocacy Summit in June, our members took part in a targeted fly-in to voice their concerns in July. Then, we held a second fly-in this September. Most recently, we worked with our coalition partners on a letter urging the preservation of like-kind exchanges in budget reconciliation legislation. Again, while the BBB is not yet signed into law, leaving the possibility of changes still yet to come, we feel confident that those Section 1031 changes are off the table for the foreseeable future.
- FIRPTA Modernization: We’ve continued our close work with influential policymakers, Representatives Tom Suozzi (D-NY) and Darin LaHood (R-IL), to advance the Parity for Non-Traded REITs Act. In addition to ongoing meetings on Capitol Hill, including active work on securing a bipartisan Senate companion bill, we recently worked with Representative Suozzi to place an op-ed in Wealth Management Real Estate last month: How a Small Change to FIRPTA Can Help House America’s Workforce
- IPA Letter in Support of Pandemic Risk Insurance Act of 2021: The IPA, as part of the Business Continuity Coalition, sent a letter to Representative Carolyn Maloney (D-NY) commending her for introducing the Pandemic Risk Insurance Act of 2021. The disruption for every industry that resulted from the pandemic requires a public-private partnership to ensure businesses have access to affordable pandemic risk insurance and a functional pandemic risk insurance marketplace. The IPA is urging bipartisan support for this critical issue.
- SEC Asset Management Committee Recommendation on Private Market Access: On September 27, the Securities Exchange Commission (SEC) Asset Management Advisory Committee met and approved a final Report and Recommendations for Private Investments, as proposed by its Private Investments Subcommittee. This report makes many of the same suggestions proposed by the IPA in our comment letter in response to the SEC’s harmonization concept release. As we continue to work to increase investor access to alternative investments, in accordance with our guiding principles, which we released in May of this year, we believe this is a positive step, and we look forward to collaborating with the SEC to advance this recommendation.
- FINRA FAQs on Filling Requirements for Private Placements: As we highlighted in our Advocacy Action Alert in September, FINRA issued further FAQs on its filling requirements for Rules 5122 and 5123. While the Securities and Exchange Commission (SEC) approved FINRA’s proposed amendments to Rule 5122 and 5123, the IPA through its FINRA Task Force is continuing to discuss interpretive questions for FINRA staff on the application of Rule 2210 to private sales material, as well as the new filing requirements of Rules 5122 and 5123, as addressed in the IPA’s comment letter on the rule proposal.
- State Advocacy: In addition to our efforts in Washington, D.C., we are actively engaged in advocacy efforts at the state level.
- One of the areas of top concern is NASAA’s recent release of the 2021 Reg BI Phase Two Report by its Regulation Best Interest Committee, following its 2020 Reg BI Phase One Report. The IPA is deeply concerned about the structural flaws and biases in the survey process, in particular with regard to alternative products. The IPA is leading a coalition of industry groups, including SIFMA, FSI, IRI, ACLI, ADISA, Nareit, SBIA and others, to address these concerns. We will share additional updates on this effort and other fiduciary standard issues that emerge ahead of the new year.
- A cornerstone of our state advocacy efforts is our ongoing work in the state of Ohio, where we continue to focus on the Division of Securities’ rulemaking practices, including its evasion of Ohio’s formal JCARR rulemaking process. The Division has now committed to going through the JCARR process over the next six months for its merit review standards, which will allow for public comment as well as oversight by the Ohio Common Sense Initiative, which is led by Lt. Governor Jon Husted. We also are continuing to speak to Ohio policymakers about the Division exceeding its statutory authority in their review of non-listed REIT/BDC offerings.
Look Ahead to 2022 Policy Advocacy Priorities
Finally, as we look ahead, we expect work to pick up on the regulatory front as various regulators place new focus on both emerging and ongoing issues, including fiduciary standards, ESG disclosures, private placement offerings and others.
In the short term, we expect that Gensler’s outlook on Regulation Best Interest (Reg BI) is unlikely to lead to new rule changes but instead use SEC examinations, enforcement actions and additional guidance to ensure compliance. At the Department of Labor (DOL), we anticipate further regulatory and sub-regulatory actions to impact existing exemptions, which we will be tracking closely following the Field Assistance Bulletin 2021-02 published last month to extend the current temporary enforcement policy into 2022.
We will continue this important work in the coming months leading up to our event, IPA Public Policy Summit – Future of Alternatives, in January. Please look out for a save the date with more details and more registration information in the coming weeks.
If you have any questions, please don’t hesitate to reach out to Tony or me.
Thank you for your continued support,
SVP, Government Affairs and General Counsel
Institute for Portfolio Alternatives