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ADISA Legislative & Regulatory Efforts – A Year-End Report

Dec 22, 2016

Throughout 2016, ADISA’s Legislative & Regulatory Committee worked on behalf of the membership to represent the non-traded alternative investment space in Washington and elsewhere, and to advocate on behalf of the industry in regard to a number of important issues. As 2017 arrives, there is no shortage of important issues for the Association’s membership to focus on, particularly through the efforts of the Committee and its leadership.  

The Committee was chaired in 2016 by John Grady, a partner with DLA Piper. In 2017, as Grady assumes the role of ADISA President, the Committee will be chaired by Catherine Bowman, founder and principal of The Bowman Law Firm, with Larry Sullivan, president of Passco Companies, as vice chair. 

“ADISA certainly has plenty to do in 2017 to keep our membership informed and also in influencing legislation and regulation which impact our industry,” said Grady. “Our Legislative & Regulatory Committee, which has been vibrantly active, will continue its outreach to help our cause.” ADISA’s Executive Director John Harrison noted that ADISA had recently added additional government relations resources to help with DOL Fiduciary Rule and 1031 Like-kind Exchange issues in Washington.
 


ISSUES, ACTIVITIES and INITIATIVES
 
DOL FIDUCIARY RULE
Since the rule-making process began, ADISA served as a vocal advocate for the industry in regard to proposed versions of the rule.  The final version of the rule and the accompanying class exemption, which were released in April 2016, reflected a number of important changes that reflected industry input.  Some key initiatives included:
 
  • Meetings with Congressional offices (House and Senate) in March 2016 
  • Compiled review of research literature for presentation to OMB, March 2016
  • Appeared before Office of Management and Budget in March 2016 
  • Published dedicated DOL Fiduciary Rule issue of Alternative Investment Quarterly (Winter 2016 issue) to familiarize investment professionals with the issue 

As we look toward 2017, ADISA will continue to follow further developments on the Fiduciary Rule, particularly as the new administration takes hold. “Somewhat surprisingly, the DOL Fiduciary Rule is back in play because of the 2016 election outcome,” said Ms. Bowman, incoming Committee Chair. ADISA staff are involved with the SIFMA-led Coalition in visitations with both new and established Members of Congress. The Coalition expects to have direct contact with the Department of Labor once a new Secretary is confirmed.

“Since the Fiduciary Rule has been effective for more than 60 days, it is considered final,” said Thomas Rosenfield, ADISA’s government relations consultant. “This means that an Interim Final Rule could be an effective tool to delay the applicability of a rule; however an IFR is subject to multiple legal challenges by the Rule’s stakeholders. For this reason, the industry constituents are likely to support other paths to reconsidering the Rule. Asking for additional time to review the Rule seems reasonable,” said Rosenfield.
 
1031 LIKE-KIND EXCHANGES
ADISA believes Section 1031 is a time-tested and important feature of our tax code, helping all of us grow business, and has actively voiced its support for the provision throughout the year.

ADISA established a Call to Congress website on the 1031 LKE issue to encourage ADISA members to contact their member of Congress, and published links to two recent academic studies—both co-sponsored by ADISA—on the value of LKEs, which can be found here

ADISA also co-signed 1031 Coalition letters to both the Clinton and Trump campaigns regarding preserving 1031s earlier this fall.

Early in 2017, ADISA will produce an educational booklet on the value and importance of Like-Kind Exchanges in our economy, and will distribute to key members of Congress. ADISA will also continue its involvement in the Real Estate Roundtable coalition and work with sister associations to help preserve the feature as the Congress looks to tackle tax reform. 

According to ADISA’s Washington sources, tax reform among the top priorities early in the incoming Trump Administration. Most likely, say ADISA’s sources, March is the earliest a new budget will be proposed. This does give some time early in 2017 for ADISA and other associations and stakeholders to present the case for preserving the Like-Kind Exchange. 
 
OTHER LEGISLATIVE & REGULATORY ISSUES
Use of Electronic Offering Documents and Electronic Signatures
ADISA submitted several letters to NASAA regarding its Statement of Policy Regarding the Use of Electronic Offering Documents and Electronic Signatures (the “SOP”), one when the Statement was initially proposed (June 2016), and the other when the Statement was revised (October 2016). ADISA also established a “Call-to-Action," where ADISA members can conveniently contact their state securities administrator regarding NASAA’s proposed REIT concentration limits. 

Definition of Accredited Investor
ADISA and IPA jointly submitted a comment letter regarding SEC's review of definition of an accredited investor (September 2016). Both organizations agreed that the potential for market disruption and investor harm that might result from changing the definition outweighs any potential investor protection or other public policy benefit, and believe that changes to the definition might in fact negatively impact the ability of companies and businesses across the country to raise needed capital for their operation and growth.  

Congressional Outreach
As part of its ongoing outreach efforts to educate Congressional members on alternative and direct investments, ADISA sent a mailing to key representatives and senators, with its pamphlet, “The Guide to Alternative Investments.” The mailing stressed the importance of non-traded alternative investments, as more and more Americans rely on them as part of their diversity strategy for general investment and retirement planning.

The Creating Financial Prosperity for Businesses and Investors Act (HR 6427)
Earlier this month, HR 6427 was passed by the U.S. House of Representatives by a vote of 391-2. The bill, which aggregates six House Financial Services Committee measures that each previously passed the House with bipartisan support, is seen as a move by Republican leadership, particularly newly re-elected Financial Services Committee Chairman Jeb Hensarling (R-TX), to promote capital formation and remove barriers to growth faced by small businesses and startups. ADISA will continue to follow this bill as it moves to the Senate.