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Week in Review

Treasury Offers Interim Tax-Credit Bond Guidance

The Treasury Departmentreleased interim guidance last week instructing municipal issuers how to issue four tax-credit bonds as direct-subsidy bonds, as was authorized by a jobs law enacted in March.

The 14-page notice makes clear that for purposes of determining issue price, issuers of the new direct-pay tax-credit bonds and Build America Bonds can rely on the tax-exempt bond rules, marking the first explicit Treasury guidance clarifying that point. It also details how to calculate premium on the direct-pay bonds.

Treasury said it and the Internal Revenue Service are determining whether further prospective guidance on secondary market trading is needed on issue price.

The interim guidance outlines how issuers of qualified school construction bonds, qualified zone academy bonds, qualified energy conservation bonds, and new clean renewable energy bonds can take advantage of the new direct subsidy payment mode.

Under the new law, issuers of QCSBs and QZABs can have roughly 100% of their interest costs subsidized by direct payments from the federal government. The payments are to be determined by the lesser of the actual interest rate of the bonds or the daily credit rate for municipal tax-credit bonds set by the Treasury. Issuers of QECBs and new CREBs can receive subsidy payments equal to 70% of their interest costs or the Treasury rate, whichever is lower.

IRI Gives Treasury, Labor RFI on Lifetime Income

The Insured Retirement Institute on Thursday sent a "broad, comprehensive" response to the request for information on lifetime income that the U.S. Departments of Treasury and Labor recently issued.

The RFI covers four areas: 1.) Incentivizing employers to offer guaranteed lifetime income options in defined contribution plans, 2.) Educate Americans about the benefits of lifetime income so that they might invest in annuities and similar products even if their 401(k) plan doesn't offer them, 3.) Simplify rules and administrative burdens on workplace savings plans, and 4.) Eliminate administrative barriers and regulatory uncertainty on educational materials in 401(k)s and other defined contribution plans.

Leave 401(k) Advice to Fiduciaries: SPARK to DOL

The SPARK Institute filed a comment letter Thursday on the Employee Benefits Security Administration's guidance on 401(k) investment advice. SPARK's concern is Department of Labor's attempt to define acceptable investment practices and theory, instead of leaving this decision on what type of advice to offer, be it computer- or adviser-based, to plan sponsors and administrators.

In essence, SPARK said, the use of historical performance in computer-based models will weaken fiduciaries' confidence in avoiding liabilities or lawsuits, and have the unintended consequence of sponsors and fund administrators offering less advice, education and investment tools to workers. Instead, SPARK recommends that the plan fiduciary select what constitutes appropriate advice.

FINRA CEO Urges Firms To Be More Responsible

WASHINGTON-Although some of the "most profound" proposals in regulatory reform made during the wake of the economic collapse are now not likely to happen, Richard Ketchum, chairman and CEO of the Financial Industry Regulatory Authority said Thursday that the financial services industry still has a responsibility to act aggressively at detecting fraud before it's cleaning up the mess at the end.

Ketchum delivered the keynote address at the Insured Retirement Institute's Government, Regulatory & Compliance Conference here. He continued his call for a universal fiduciary standard among advisers and broker/dealers, and he also said FINRA will emphasis a stronger risk-based exam program.

70% Doubt They'll Retire

Seven of 10 employed individuals have given up on the idea of retirement, according to the 2010 EBRI Retirement Confidence Survey. That's up from 63% in 2008, at the nadir of the market's plunge.

However, this pessimism may be unfounded: Just 23% of people at or above retirement age continue to work, the survey says.

Many of these people work by choice-92% of retired respondents who continue to work say they do so to stay active, and 86% say they enjoy working.

"Those currently working are more skeptical than those actually in retirement" about whether they have enough to live on, said Craig Copeland, senior research associate at the Employee Benefits Research Institute.

Redefine Retirement, Regain Trust: Krawcheck

Sallie Krawcheck, president of Bank of America's global wealth and investment management unit, said during her keynote address at the Securities Industry and Financial Markets Association private client conference that the attitude that what happened in the financial industry is "not our fault" won't do the industry any good.

Only by looking at the mistakes of the past and doing better next time will the industry repair the damage done, Krawcheck said. This includes accepting pending regulatory reform.

Krawcheck said executives from Merrill Lynch, a unit of Bank of America, have been traveling the country conducting focus groups where clients have said adviser trustworthiness trumps performance. Clients also want advisers to charge a fair price for services, to be upfront and keep them informed.

At the end of the day, she said, the financial services industry offers a unique value to clients. The winning components of this value proposition are people and technology.

"Hopefully the events of 2008 taught us lessons we won't forget," she said. "If we have short attention spans, we are in the wrong business."

One of the ways to ease investor concern, Krawcheck suggested, is for the industry to redefine retirement. With 77 million Baby Boomers heading into retirement, there are many worries over the fact that people are living longer and whether they will have enough money to last the rest of their lives. Yet financial advisers are speaking a different , jargon-laden language, she said.

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