Author: jfortenberry@fortenberrylaw.com

You would think that a major high-tech company would have the foresight to buy up every domain name that is a misspelling of the company name or is similar in any way. And yet, this company missed one such name which you can read about here. Now the company is going to battle with the teen who thought of it. You can see why the company is concerned here–even Google thinks it is confusing. A better course than legal battle, in my opinion, would be to pay Mike for his costs and establish a college scholarship in his name for teens exhibiting ingenuity and creativity.

Some other teens that have gotten creative can be found here and here.

“The “Bagle” or “Beagle” worm arrives as an attachment to an e-mail with the subject line “Hi” and “test : )” in the body text. The worm is activated when a user clicks on the attached file.” Beware and read about it in this article from the Washington Post.

Mutual funds have been the focus of the news over the past couple of days. You can access information about the open meeting of the Securities and Exchange Commission held yesterday here as well as the SEC Chairman William H. Donaldson’s opening statement at the meeting here. The SEC proposed three regulatory initiatives:

• Investment Company Governance. The Commission voted to propose amendments to its rules to enhance fund boards’ independence and effectiveness. The proposal includes requirements for (1) the independent composition of the Board, (2) an independent Chairman of the Board, (3) an annual self-assessment of the Board, (4) separate sessions for the independent Board members (providing Board members with “opportunity for candor”), and (5) the enabling of independent members of the Board to hire their own staff.
• Codes of Ethics for Investment Advisers. The Commission voted to propose new rule 204A 1 and related rule amendments under the Investment Advisers Act of 1940. New rule 204A 1 would require registered investment advisers to adopt and enforce codes of ethics applicable to their supervised persons and would seek to prevent fraud by reinforcing the fiduciary principles that must govern the conduct of advisory firms and their personnel. The code of ethics would have certain minimum provisions governing (1) standards of business conduct that would govern the conduct of an adviser’s supervised persons so that it reflects the adviser’s fiduciary duties, (2) compliance with Federal securities laws, (3) safeguards for nonpublic information, (4) reporting of personal securities holdings and transactions, (5) pre-approval of certain transactions by supervised person, and (6) required reporting of code of ethics violations.

• Confirmation Requirements and Point of Sale Disclosure Requirements for Transactions in Certain Mutual Funds and Other Securities, and Other Confirmation Requirement Amendments, and Amendments to the Registration Form for Mutual Funds. The Commission voted to propose two new rules and rule amendments that require broker-dealers to provide certain information to their customers in connection with transactions in certain types of securities. The two new rules would require broker-dealers to provide their customers with targeted information, at the point of sale and in transaction confirmations. The required information would include costs and conflicts of interest that arise from the distribution of mutual fund shares, unit investment trust (UIT) interests (including insurance company separate accounts that offer variable annuity contracts and variable life insurance policies), and municipal fund securities used for education savings (commonly called 529 plans). The SEC states in its press release that these initiatives are intended to give investors “news they can use.”

Comments on the “Investment Company Governance” and the “Codes of Ethics for Investment Advisers” proposals must be received by the SEC within 45 days of being published in the Federal Register. Comments on the Disclosure requirements must be received within 60 days of being published in the Federal Register. (I discussed where to go to make comments online in this post.) View the press release for further information.

News articles on the proposals:

• The New York Times: S.E.C. Plan Would Force Fund Boards to Change”
• The Associated Press via the Washington Times: “Regulators eye ethics of mutual fund sales”
• CNNMoney.com: “SEC proposes fund ethics requirement: Group votes unanimously to propose new ethics rules for fund advisers and employee disclosure”
• The Wall Street Journal: “SEC Unveils Mutual-Fund Rules.” (No link available.)

Also, the Foundation for Fiduciary Studies has issued the following press releases regarding the proposals:

• Guide to SEC Probe of Mutual Fund and Brokerage Scandals
• Guide to SEC Probe of Consultant Pay-to-Play Schemes
• Guide to SEC Proposal for Required Code of Ethics

Finally, some less current mutual fund articles of interest:

• USAToday.com: “More charges ‘almost inevitable’” (an interview with New York Attorney General Eliot Spitzer)
• The Philadelphia Inquirer: “Funds boards could get teeth to fight fraud”
• The WashingtonPost.com: “State of the Mutual Fund Industry“

Howard Bashman at How Appealing has been discussing how bloggers now can utilize the more permanent New York Times links available through the RSS feed so that links do not disappear behind the New York Times’ archive wall. You can read his remarks here and here. For those who would like to take advantage of the more permanent links but do not utilize a news aggregator, please take note of the New York Times Link Generator. Read more about Link-Rot in this post at CalPundit.

I will be utilizing the more permanent links here in the future.

UPDATE: I have added a permanent parking spot for the New York Times Link Generator in the column over on the right. (Scroll down.) For links that have already gone defunct, the only way that I know of to obtain the original link (so as to be able to insert it into the Link Generator) is to view the original source code for the blog post and extract it that way. If other techie-types know of a better way, please let me know.

The Associated Press via the SeattleTimes.com is reporting: “SEC looking at pension consulting firms.” More on this later . . .

I have added the following table, containing the 2004 Retirement Plan Limits, in a permanent location over in the right-hand column:

401(k)/403(b) Elective Deferral Limit (402(g)(1))	$13,000
Government/Tax Exempts Deferral Limit (457(e)(15))	$13,000
Catch-up Cont.’s Limit	$3,000
Annual Compensation Limit	$205,000
HCE Comp. Limit	$90,000
Key Employee Officer Comp.	$130,000
Max. Annual Benefit: DB Plan	$165,000
Max. Annual Contribution: DC Plan	$41,000
SEP Minimum Comp.	$450
SEP Compensation	$205,000
SIMPLE Employee Cont. Lmt.	$9,000
SIMPLE “Catch-Up” Deferral Lmt.	$1,500
FICA Wage Base	$87,900

AccountingWeb.com is reporting: “IRS E-Filing Directive Sparks Privacy Debate.” The article asks: “Is it unnecessary government intrusion or a way to gather routine information?” Tax preparers are debating that question since the IRS announced it would flag taxpayers who use its free electronic tax filing program, and this on the heels of the IRS trying to encourage taxpayers to file electronically in order to reduce paperwork. One commentator decries the practice, saying “Taxpayers should not have their records flagged and segregated simply because they choose to use the IRS Free File program.”

The IRS response to the outcry according to the article: “Terry Lutes, IRS e-filing chief, said flagging the returns is needed to judge the effectiveness of the program and to better market e-filing. He said the IRS is gathering routine information, and he is “flabbergasted” by privacy arguments.”

The Philadelphia Inquirer today features two good op-eds on mutual funds:

• “Mutual funds can’t justify high expenses”
• “What to look for in year’s statement”

Also, the New York Times has this: “Pressure Builds to Cut Fund Fees.”

And, this is particularly interesting from the Financial Times: “US mutuals face flak over costs.” The article discusses how “US mutual fund groups are facing mounting criticism for passing on the rising cost of their liability insurance to shareholders in the wake of the scandals plaguing the industry.” The article notes how “premiums to protect mutual funds and executives against lawsuits have risen more than 300 per cent” as a consequence of the widening mutual fund investigations.

UPDATE: Another aspect to the fee discussion from MSNBC.com: “Fund fees finance interests of lobbyists: Industry favors policies that is seen hurting investors.”

ADDITIONAL UPDATE: On a related mutual fund investigation topic, “SEC head says fund abuses detectable: Chairman Donaldson says fund directors could have seen abuses if fund flow data was monitored” from CNNMoney.com.

Previous posts here at Benefitsblog in the last couple of weeks have focused on recent pronouncements and activities at the IRS: “The IRS Scrutinizes Its Own” and “IRS Targeting ‘Abuses of Integrity’.” In the news today, there are more pronouncements from IRS Commissioner Mark Everson as discussed in this article from the New York Times: “I.R.S. to Add to Enforcement by Reducing Its Clerical Staff.” Also, from the Associated Press via Yahoo! News.com: “IRS Job Cuts to Make Way for New Hires.”

Please note the inconsistencies in these reports. The New York Times reports the IRS is cutting 6,700 jobs; the Associated Press reports only 2,400 jobs are being cut. Which is right? The IRS newswire which I received (IR-2004-3) says that the IRS will be (1) closing its Memphis tax return processing operations effective in October, 2005; (2) consolidating its back-office processing for exam, collection and insolvency cases from 92 different locations to four starting in 2005; and (3) reducing agency overhead in internal support functions, particularly through new technology gains in the human resource area, starting in 2005. The newswire goes on to say that the IRS has advised the union that these initiatives involve functions of approximately 6,700 of its 115,000 current employees, but that only about 2,400 employees may be involuntarily separated. The newswire reports that savings from the three initiatives will allow the IRS to fill 2,200 new positions.

As stated in the first part of the newswire, the goal of it all, according to Mr. Everson, is this–to “devote more people to front-line positions and strengthen tax enforcement activities.” (Sounds like they are building a veritable army, doesn’t it?) Also, another part of the newswire says that “[s]avings from these initiatives will allow the IRS to hire more people to pursue cheating by high-income individuals and corporations, continue our attack on abusive tax shelters, bolster our criminal investigation efforts and assist with other enforcement priorities.”

How will all of this affect enforcement in the employee plans arena? Back in October, I reported on how the IRS is shifting its focus to examinations now that the determination letter application program is winding down, following completion by most plans of the GUST amendment process. You can read about it here: “From My Notes: The Mid-Atlantic Pension Liaison Group Meeting.” (This group will meet again at the end of January and updates on any previous information will be reported on then.)

Also, in the news last fall, were reports that the IRS had begun an audit initiative focusing on compensation arrangements for corporate officers, directors and other senior executives.

On a related topic, CCH has some good information today on IRS plan audit policies from Preston Butcher, Employee Plans Examinations Director: “IRS explains on-site plan audit policy.”

Finally, after all of that seriousness, it is time for some IRS audit humor (via the Tax Guru) here and here.