Washington, DC Federation of Exchange Accommodators Federal Trade Commission

The petition, submitted to the FTC earlier this month, calls for rules that would: require persons who want to act as exchange facilitators to register with the FTC; require facilitator companies to designate an "exchange facilitator officer" with demonstrated experience and training; require QIs to "act as a custodian of exchange funds and invest in a manner that provides sufficient liquidity and preserves the principal of the exchange funds;" and require facilitators to maintain certain levels of insurance, bonds, letters of credit and/or deposits. It also calls for authorization of the FTC "to revoke or suspend a registration for misrepresentations, failing to account for property belonging to others, or deceptive conduct," accord to the FEA.

The proposal in large part mirrors the FEA's own code of ethics and is the result of two high-profile failures of QIs in the past year as well as efforts in some states to adopt regulations of their own. As previously reported in NET LEASE fourm, Nevada recently adopted a new law regulating exchange facilitators, and in addition to a proposal in California, the FEA says it is aware of similar legislative interest in Colorado, Idaho and Washington.

"It seemed like the prudent thing to do was to get out ahead of this," FEA president Hugh Pollard says, adding that a federal standard would be preferable to different laws state-by-state. "It's time to do something like this. We were able to rely on the integrity of people in the industry for a long time. I guess the world is changing."

Earlier this summer, representatives of the FEA met with FTC staff and California Congresswoman Anna Eshoo, who the association says initiated discussions with the FTC about the possibility of a national regulation. Based on the meeting, Pollard says he thinks the FTC feels it has jurisdiction over the matter. He expects the association's board to receive an update soon on the petition process from its counsel.

The FEA will hold its annual conference Oct. 4 to 6 at the Westin Michigan Avenue in Chicago.

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FEA Petitions for Federal QI Standards

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