ADISA President Matt Malone signed a letter on behalf of ADISA’s membership expressing concern about language included in Sec. 138312 that would make certain investments impermissible for individual retirement accounts (IRAs) to own.

The language in question would disallow investments in securities the issuer of which requires investors to meet minimum levels of assets or income (or minimum levels of education or specific licenses or credentials) in order to invest. In light of the harm that will likely accompany any such proscription, ADISA requests the removal of this language from the bill.

Sec. 138312 would, in brief, bar the holding in IRS of publicly-issued securities such as non-exchange traded REITs and BDCs along with other privately-issued investments. Sec. 138312 would not necessarily affect the amount of money any given individual might contribute to an IRA, only the mix of investment held in the account.

Legislation that would restrict the ability of IRAs to purchase and hold entire classes of investment securities based solely on the fact that such investments establish criteria for investment that implicate wealth, income and/or licensure raises the following concerns, examined in this order:

1. There is no evidence of an existing problem with the inclusion of investment products offered to accredited investors in retirement savings account: quite the contrary, in fact.
2. The broad definition proposed is likely to sweep up a host of asset classes which have minimal, externally-imposed suitability requirements, complicating retirement savings management in unexpected and detrimental ways.
3. If this stipulation goes into effect with a 2-year period for liquidation of the assets in question—which are typically illiquid—then devaluation is sure to occur: illiquid assets will undergo a forced liquidation at subpar pricing and terms, meaning the ensuing tax revenue that might be collected will also be much less that the fully performing asset.
4. Regulators and the IRS have already acted on valuation issues on unconventional assets, and new methods for making and reporting valuations are only beginning to be reflected.
5. Other mechanisms are already being proposed which address the size of the accounts that some very wealthy individuals may have in Individual Retirement Accounts (IRAs).

The full letter, drafted by Catherine Bowman, The Bowman Law Firm; John Grady, ABR Dynamic Funds; John Harrison, ADISA; and Thomas Rosenfield, JD, CAE, HillStaffer, goes into detail on each of these concerns. It was sent to the following members of congress:

The Honorable John Yarmouth

Chairman, Committee on the Budget

The Honorable Jason Smith

Ranking Member, Committee on the Budget

The Honorable James P. McGovern

Chairman, Committee on Rules

The Honorable Tom Cole

Ranking Member, Committee on Rules

The Honorable Nancy Pelosi

Speaker of the House

The Honorable Chuck Schumer

Senate Majority Leader

The Honorable Bernie Sanders

Chairman, Senate Budget Committee

The Honorable Lindsay Graham

Ranking Member, Senate Budget Committee

The Honorable Ron Wyden

Chairman, Senate Committee on Finance

The Honorable Mike Crapo

Ranking Member, Senate Committee on Finance