An Introduction to Independence for Spouses and Spousal Equivalents

Transcription

1 An Intrductin t Independence fr Spuses and Spusal Equivalents

2 Cntents Welcme!... 2 Intrductin t independence... 3 What is independence?... 3 Why is it imprtant?... 3 Wh des it affect?... 3 When des it take effect?... 3 Hw d yu cmply?... 4 Independence areas... 4 Financial relatinships... 4 Financial relatinship tls... 5 Emplyment relatinships... 6 Other business relatinships... 7 Life events... 7 Helpful tips... 8 Thank yu... 9 Page 1 f 10

3 Welcme! Welcme, and thank yu fr taking the time t learn abut persnal independence requirements at Delitte 1. If yur spuse r spusal equivalent wrks fr Delitte, yu may already be familiar with the term auditr independence as it relates t their prfessin. The purpse f this tl is t help yu have a better understanding f the cncept f persnal independence, which is a key cmpnent f meeting ur prfessinal respnsibilities. As yu ll see, persnal independence affects nt nly ur wn prfessinals, but als their spuses r spusal equivalents and their dependents. Befre we g any further, let s first explain what we mean by a spusal equivalent yu culd lk at it as anther way f saying dmestic partner. We define a Spusal Equivalent as: a civil unin in which the applicable law des nt define the parties as spuses; a dmestic partnership registered with a gvernmental bdy; a dmestic partnership declared by the parties fr jint cverage under an emplyer health and welfare benefit plan; r when the parties hld themselves ut as married. Fr ease f reference in this tl, we will refer t bth spuses and spusal equivalents tgether as yur spuse. Just keep in mind that whenever yu see r hear spuse, we are referring t bth because they are treated the same under ur regulatry requirements. Yur careful attentin t these cmpliance matters will help in ur nging effrts t prtect, preserve, and enhance ur reputatin fr Delitte, ur clients and ur peple. But what exactly des independence cmpliance mean t yu? Why is it imprtant fr yu t understand this when yu are nt actually wrking fr Delitte yurself? The simple explanatin is that the regulatrs cnsider yur financial relatinships directly attributable t yur spuse. Since yur spuse des wrk fr Delitte, that means certain plicies impact yu as well. The independence requirements cver a variety f tpics. Even yur emplyment and related financial benefits will be evaluated t make sure there are n independence cnflicts. Unless yu ve wrked in the public accunting prfessin r a related rganizatin, the cncept and requirements arund independence may be cmpletely freign t yu. It s imprtant fr yu t be infrmed, have discussins, and make decisins with yur spuse t help him r her cmply with independence plicies. 1 As used herein, Delitte means Delitte LLP and its subsidiaries. Please see fr the legal structure f Delitte LLP and its subsidiaries. Page 2 f 10

4 Intrductin t independence What is independence? Independence can be described as integrity, prfessinal skepticism, intellectual hnesty, bjectivity, and freedm frm cnflicts f interest bth in fact and appearance. Independence can tuch n a wide range f tpics frm the services prvided by Delitte right dwn t yur wn persnal finances, as the spuse f a Delitte prfessinal. Fr example, did yu knw that if yu want t purchase stck in a cmpany, yu will need t investigate whether yur spuse is allwed t invest in that particular cmpany? Sme level f independence requirements will apply t yu bth. Why is it imprtant? As ne f the largest prfessinal services rganizatins, we must meet certain regulatry requirements. Nt nly d we, as an rganizatin, have t cmply with certain independence requirements, but ur prfessinals (including their spuses) d as well. By cmplying with the independence requirements, we satisfy certain expectatins f ur regulatrs while als maintaining the trust f ur clients and the public and prtecting Delitte s reputatin. Wh des it affect? Independence bligatins apply nt nly the Delitte prfessinal, but als their immediate family members (e.g., spuse and dependents). The SEC (Securities & Exchange Cmmissin) and AICPA (American Institute f Certified Public Accuntants) view spuses and dependents as equivalent t the Delitte prfessinal in many situatins. All Delitte prfessinals have sme level f independence bligatins, which are determined by the specific rle they perfrm within Delitte. As their career prgresses, additinal independence plicies will apply t them, and, in turn, thse additinal independence plicies will apply t yu as well. When des it take effect? As sn as a prfessinal jins Delitte, he/she and his/her spuse and dependents are bund by ur independence plicies. If yu were nt cnsidered a spuse at that time yur current spuse jined Delitte, remember that nce this changes and yu d becme a spuse r spusal equivalent, that is when the independence plicies will apply t yu. If yu re nt a spuse yet, it is recmmended that yu have pen discussins regarding yur financial relatinships befre yu take that step in rder t prepare fr any impact that the independence requirements may have n yu. Additinally, certain life events, such as buying a new huse r having children, can bring changes t yur and yur spuse s persnal financial relatinships in the future, which yu ll be required t reprt and reslve as apprpriate. In general all new financial relatinships shuld be cleared ahead f time, and then reprted fr independence purpses within 10 calendar days. Page 3 f 10

5 Hw d yu cmply? Delitte uses a shrthand way f summarizing the parameters f ur independence plicies that will be applicable t yu and yur spuse by assigning each prfessinal a Ruleset and Scpe based in part n the type f wrk they d r the services they prvide. There are numerus tls, resurces and peple available t help yu and yur spuse navigate thrugh the independence requirements and their applicatin t yur wn circumstances. Independence is a persnal matter, and as yu will see, there are many aspects t it. It s impssible fr us t cver all the plicies in a matter f just a few minutes. Yu and yur spuse shuld have an pen dialgue abut yur financial relatinships. Dn t assume that a particular type f financial relatinship desn t matter. It s best fr yur spuse t be fully aware f bth yur current financial relatinships and ptential changes that yu are cnsidering s that he r she can reprt them and mnitr them as apprpriate. As yu cntinue t explre, think abut hw independence culd impact yur persnal situatin as the spuse f a Delitte prfessinal. Independence areas As a Delitte prfessinal, yur spuse needs t be able t demnstrate independence bth in fact and appearance. The fact aspect is largely cvered by the SEC and the AICPA rules which clearly state which financial relatinships and emplyment relatinships are subject t independence cnsideratins. Appearance is essentially the ability t shw that bjectivity has been maintained with respect t any given Delitte client. As yu cntinue t explre this site, yu will find examples f hw independence is demnstrated in fact and appearance thrugh cmpliance with the independence requirements. Financial relatinships Several types f financial relatinships are cvered by ur independence plicies, such as lans, insurance, brkerage accunts, benefit plans, stcks, and mutual funds. The rules apply by taking int accunt the facts and circumstances f the situatin. Yu may have heard the term Restricted Entity frm yur spuse. This is the term we use t refer t all f ur audit clients and their affiliates. If smene wants t invest in a particular Restricted Entity r enter int anther financial relatinship, they shuld first verify whether it is restricted fr them based n their Ruleset and Scpe. If it is restricted fr that individual, they shuld nt acquire the financial interest r enter int the financial relatinship. Similarly, if an individual has an existing financial relatinship and that cmpany becmes restricted fr them, they may need t divest. Fr example, if yu r yur spuse have a financial relatinship with a cmpany that becmes a Delitte audit client, this relatinship may be ne that ur independence plicies d nt permit. In that case, yu will need t take actin t reslve any utstanding independence issues. Yu shuld be aware that a reslutin might result in yu having t take a lss n an investment, prepaying a lan that still has favrable rates, r therwise incurring a cst. Cmmnly verlked financial situatins t cnsider: Page 4 f 10

6 Yur current emplyer benefit plan: This is a financial relatinship that will need t be cnsidered when yur spuse is reprting his/her hldings, and yu shuld wrk tgether t make sure that nne f the underlying hldings are restricted fr yur spuse even if thse underlying hldings are diversified mutual funds. Nn-U.S. financial hldings: When cnsidering yur financial relatinships, remember that yur spuse shuld include and reprt anything yu may wn verseas. Yu may have lived r wrked abrad and therefre may have a frmer emplyer benefit plan, r freign investments and bank accunts; r yu may have a hme in anther cuntry. All f these need t be evaluated as yur spuse reprts yur hldings. Assets under yur cntrl r influence: There may be situatins where yu have cntrl r influence ver the assets f smene else. Fr example, having an active pwer f attrney ver anther persn; acting as an executr f an estate; serving as trustee r c-trustee f a trust; wning r having cntrl ver a business. If any f these apply t yu, yu shuld knw that all the assets ver which yu have cntrl r influence are attributable t yu and yur spuse shuld reprt them as such. Frmer emplyer benefit plan: If yu were previusly emplyed by anther cmpany, chances are yu have an Emplyee Benefit Plan (EBP) frm that cmpany. Yu might assume that since yu have left yur ld cmpany yu dn t need t wrry abut the EBP frm yur previus emplyer. This is nt the case. The plan and the investments are still a financial relatinship and as such are attributable t yu, even if yu dn t wrk fr that emplyer any mre, and yur spuse will als need t reprt these hldings. In additin, if yur spuse is hired r prmted t a manager r abve psitin at Delitte, yu are expected t rll ver yur prir U.S. emplyer EBPs t either a current emplyer s benefit plan r a self-directed IRA with a permissible brkerage firm within 60 days. Financial relatinship tls At this pint, yu might be thinking t yurself, Ww, there are a lt f financial relatinships t cnsider. S, hw d we help yu bth t manage it all? While it is each prfessinal's respnsibility t mnitr and maintain independence, we als prvide a number f tls which make it easier t manage cmpliance with ur independence plicies. Listing f audit clients: All Delitte prfessinals have access t certain tls such as a list f audit clients and their affiliates, s that yu can bth see sme f the financial relatinships that are restricted. The primary search tl is smetimes referred t as the Restricted Entity list r DESC (Delitte Entity Search & Cmpliance) System. System fr mnitring financial relatinships: Managers and abve (wh have mre independence requirements) have access t even mre tls. If yur spuse is at this level, yu may have heard abut the Tracking & Trading System; this is a system they are required t use t recrd and help mnitr their financial relatinships (including, but nt limited t, lans, insurance, mutual funds and ther investments). Page 5 f 10

7 Managers and abve can als use this tl t research future financial relatinships they are cnsidering. If yu are cnsidering a new financial relatinship and yur spuse des nt find it in DESC, they shuld check the Tracking & Trading System as anther surce. They can even enter the hlding ahead f time and g thrugh the steps t determine if it is restricted fr their Ruleset and Scpe (a prcess called pre-clearing ). Autmated tl fr reprting and mnitring brkerage accunts: If yu have a spuse wh is at the manager level r higher, yu are prbably als aware that we have a tl that allws autmatic dwnlads f financial hldings frm an authrized brkerage accunt t an individual s Tracking & Trading System, which significantly decreases the effrt required f prfessinals t timely reprt and mnitr their brkerage accunt hldings. This tl is knwn as the Brker Data Imprt Prgram (BDIP). Prfessinals at this level are required t enrll and use nly apprved, participating brkers and t prmptly enrll any new accunts they establish. This applies t bth regular trading accunts as well as IRAs and ther specific purpse accunts that are set up as brkerage accunts. In rder t better mnitr cmpliance as it relates t mutual funds, we als have a plicy that requires all new US mutual fund purchases t be made thrugh a BDIPenrlled accunt (rather than purchased directly frm the rganizatin). This is intended t make reprting in Tracking & Trading easier n ur prfessinals and reduce the chances f an inadvertent independence issue. Emplyment relatinships Anther area f independence which impacts many Delitte prfessinals is the emplyment relatinships f their spuses, their dependents, and their clse relatives (which includes parents, step-parents, and siblings). Nte that these rules generally d nt apply t yur wn parents, step-parents r siblings nly thse f the Delitte prfessinal. Questin t cnsider: Des it matter where yu wrk? It culd matter where yu wrk. It all depends n yur spuse s rle at Delitte and what rle yu have in yur cmpany. If yu are emplyed by a Restricted Entity, yur spuse will reprt this in his r her peridic independence representatin. We then analyze the facts and circumstances t see if there wuld be a cnflict under any f the regulatry rules that apply t that specific client. Yur spuse des nt have t wait fr his r her independence representatin t reprt yur emplyment at a Restricted Entity. This can and shuld be reprted as sn as pssible s that we can analyze the situatin and prvide yu with the guidance yu need fr yur situatin. Fr example: When yu are emplyed at a Restricted Entity, this can bring additinal independence cnsideratins, such as: What type f psitin d yu hld? Will yur spuse prvide services t the client r its affiliates? D yu have an emplyee benefit plan with, r investments in, the Restricted Entity (such as cmpany stck)? Page 6 f 10

8 If yu are emplyed by a Restricted Entity, r yu are cnsidering accepting such emplyment, yur spuse shuld reach ut t Natinal Office (Independence) t discuss the facts and circumstances t determine whether any steps need t be taken t reslve any emplyment relatinship cncerns. Other business relatinships Other business relatinships can include clsely held investments such as if yu plan n investing in a business r ging int business with friends/relatives, r if yu ve already dne s. If yu and/r yur spuse are in partnership with ther peple, r have a similar investment in anther type f clsely held business, yu shuld discuss it with Natinal Office (Independence) s that they can evaluate whether there are any independence cnsideratins and als prvide yu and/r yur spuse with guidance n hw yur spuse shuld manage and reprt these situatins. Examples: Partnership Limited Liability Cmpany What shuld yu d if yu r yur spuse have a clsely held business such as a partnership with ther peple r a limited liability cmpany? Yu shuld discuss it with Natinal Office (Independence) s that they can evaluate whether there are any independence cnsideratins and prvide yu and yur spuse with guidance n hw t manage and reprt thse situatins. Life events Nw that yu have a basic understanding f the requirements, let s lk at hw these requirements are applied when certain events r milestnes happen in yur life, which can affect yur family structure, finances, investments, and emplyment. This is what we mean when we refer t life events. The impact and any resulting independence cnsideratin fr yu and yur spuse that arises frm a life event shuld be carefully lked at, reprted, and reviewed. Life events t cnsider: Additins t yur family: Whether it is the birth r adptin f a child, r gaining a dependent because yu are starting t care fr an elderly parent r a sick relative, an additin t yur family culd have a significant impact n yur financial relatinships. Everything these individuals have are attributable t yur spuse, and must be in cmpliance. These events shuld trigger the review f any new financial relatinships that becme attributable t yu as a result f the event. Cnsider the fllwing: Are yu planning t pen a 529 plan, UGMA, UTMA r ther savings vehicle fr a child? Has anyne gifted yur child stcks, bnds, r ther financial interests? Page 7 f 10

9 Did yu make any changes t yur life insurance? Are yu nw acting as pwer f attrney r trustee fr anther individual? If yu gain a dependent wh already has established financial relatinships, have yu evaluated them fr cmpliance with independence plicy? Purchasing a new hme: Purchasing a new hme whether it s a primary hme, a vacatin hme, r an investment prperty is a time-cnsuming prcess. It als brings a number f new financial relatinships. Cnsider the fllwing: Will yu acquire a new mrtgage? Will yu acquire prperty insurance n the new prperty? Will yu acquire a new line f credit r hme equity lan? Des this purchase mean that ne f yur ther prperties is n lnger yur primary residence? Establishing, having influence ver, r being named beneficiary f a trust: If yu establish r have influence ver a trust, the assets f the trust are attributable t yu and therefre yur spuse. Placing assets in a trust des nt relieve yu f yur independence respnsibilities. Even being named as a beneficiary f a trust may have independence implicatins depending n the facts and circumstances. Cnsider the fllwing: Hw much influence d yu have ver the trust r the trustee? If yu set up a trust r have influence ver ne, where is the trust held? What assets are in it? If yu are a trust beneficiary, are yu aware f what is in the trust? D yu knw if it is material t yu? Transferring t a new ffice: In an rganizatin like Delitte, transfers t a new ffice lcatin are nt uncmmn. Yu may als have yur wn career where an ffice transfer is pssible. Whatever the reasn, transferring t a new lcatin is certainly an event that requires a lt f planning, and yu shuld cnsider the independence implicatins as yu d s. Cnsider the fllwing: Are yu purchasing a new hme r a new vehicle? Transferring t anther ffice may impact the entities that are restricted fr yur spuse. Have yu checked t see if yu will need t divest f any f yur current hldings? If yu are transferring because yur Delitte spuse is accepting a new rle, will his r her Ruleset r Scpe change, which may impact yur future financial planning? Helpful tips In many cases, yu ll want t check plicy befre taking any actin. Here are a few helpful tips fr maintaining cmpliance. Page 8 f 10

10 Financial decisins: Always make new investment decisins tgether and cntact Natinal Office (Independence) with any questins r cncerns. Dn t try t make the determinatin yurself as t whether an entity is restricted r nt. While lking at the auditr f the cmpany is a gd first step, many clients that we dn t audit are als restricted because they are affiliated with ur audit clients. D nt pen a 529 Plan withut discussing it first with yur spuse and having him r her check whether it is restricted. A plan culd be restricted because it is spnsred by a Restricted Entity, r because the underlying investment ptins are restricted. If yu are thinking f refinancing yur mrtgage, n matter hw appealing the interest rate is, please check whether the lan is permitted befre yu take it ut. There is a chance it has becme restricted since yu tk ut the riginal lan, which culd be an independence issue. When btaining any type f lan, d nt wait until yu are ready t sign the lan dcuments befre yu check whether it s restricted. If yu find ut at the last minute that it is restricted fr yu, having t find a new lender will delay the clsing f yur lan. Check all current financial relatinships t maintain cmpliance and reslve any instances f nn-cmpliance: Issues f nn-cmpliance shuld be reslved within 10 days r yu can cntact Natinal Office (Independence) fr help if yur situatin is a cmplex ne that may take lnger t reslve. Life events: Be mindful f changes due t certain life events and wrk with yur spuse t keep current with all yur financial and emplyment relatinships and validate cmpliance. Thank yu Thank yu fr taking the time t learn abut independence and what it means t yu and t yur spuse s career at Delitte. As yu ve learned, independence is a far-reaching tpic. Persnal independence, as the name suggests, is persnal t yu and yur spuse. Delitte recgnizes that everyne s situatin is different. We knw this a lt f infrmatin t take in and there are a lt f requirements t understand. Investing a small amunt f time nw t research and understand independence will be well wrth yur while and will save yu and yur spuse time in the lng run. Thugh all this may seem like a lt f wrk remember that independence plicies are based n requirements set by ur regulatrs. Delitte appreciates all the effrt that spuses and family members make n a daily basis t help ur prfessinals fulfill their respnsibilities. Thank yu fr yur attentin t this imprtant tpic! Please feel free t call r Natinal Office (Independence) fr help with evaluating yur persnal independence circumstances. The Cmpliance HelpDesk is a resurce that is available t spuses f all Delitte persnnel, and it can be a first prt f call fr questins yu may have related t persnal financial independence. Spuses f Delitte persnnel can cntact the Cmpliance HelpDesk with any independence questins. Delitte persnnel must cmplete and submit a frm befre spuses can cntact the Cmpliance HelpDesk. Page 9 f 10

11 Fr questins, cntact the Cmpliance HelpDesk: TO-CMPLY ( ) and press 8 fr spusal supprt cmpliancehelpdesk@delitte.cm Cpyright 2016 Delitte Develpment LLC. All rights reserved. Page 10 f 10