March 2020

Dear SDDco Clients and Colleagues: Our SDDco Perspective includes industry news, guidance, regulatory rule updates, deadlines, and other timely matters impacting brokers, advisors, fintech firms, taxpayers, investors, and their service professionals. The SDDco Perspective is made available on our website monthly at http://sddco.com/resources-newsletter.

IN THIS ISSUE:

• The U.S. SEC Rejects the Latest Attempt to Launch a Bitcoin (BTC) ETF
• Zero-Factor Authentication: Owning Our Data
• OCIE Publishes Cybersecurity Report
• The Calm before a Second ICO Storm?
• Tax Obligations

The U.S. SEC Rejects the Latest Attempt to Launch a Bitcoin (BTC) ETF

The SEC disapproved a NYSE Arca, Inc. rule change application on February 26, 2020, that would have permitted the Wilshire Phoenix Funds, LLC to list a bitcoin-based exchange-traded fund product (ETF; ETP). The SEC has yet to approve such a product (there have been six prior major attempts in the last few years) asserting that it will not do so unless the listing exchange is capable of effectively obtaining from a market (or markets) of significant size that trade the underlying securities “information necessary to detect, investigate, and deter fraud and market manipulation, as well as violations of exchange rules and applicable federal securities laws.”

The standard being imposed by the SEC is contingent on the notion that the exchange applying for such a listed product would need to show that “there is a reasonable likelihood that a person attempting to manipulate the ETP would also have to trade on the underlying market(s) to successfully manipulate the ETP, so that a surveillance-sharing agreement would assist in detecting and deterring misconduct.” Not everyone agrees with the SEC’s position that the NYSE Arca, Inc. did not prove its case, including SEC Commissioner Hester Peirce, known as “crypto mom.”

• Yahoo Finance – SEC Rejects latest Bitcoin ETF Bid
• SEC Filing Posted February 26, 2020
• Dissenting Statement of Hester M. Peirce (Feb. 26, 2020)

Zero-Factor Authentication: Owning Our Data

Are you asking the right questions to determine how well your vendors will or are protecting your data? Probably not. If you are a small business owner who outsources payroll, you are giving personal access to your bank accounts to a third-party vendor. You’re probably more concerned with their BCP, disaster recovery and not thinking of the simple authentication process behind password resets.

Do they use multifactor authentication or just SMS-based two-step login? What about “forgot your password” or “Password Reset” policies? Can you just call in with your full name and last 4 digits of your social and you’re in, free to make whatever changes you want? Vulnerabilities are right in front of your eyes and we completely bypass them. You need to ask whether the vendor has separate production and nonproduction environments, or how their admins and developers access the environments, or how customer password resets are done.

Read More >

OCIE Publishes Cybersecurity Report

On January 27, 2020, the SEC’s Office of Compliance Inspections and Examinations (OCIE) published a report addressing cybersecurity best practices.  The report characterizes cybersecurity as “a key risk for security market participants” and a “key priority” for exams. OCIE recommends that firms: conduct risk assessments; adopt, implement and test policies and procedures; restrict access; inventory the location of data; conduct vulnerability scanning; implement patches; encrypt networks; create an incident response plan, and supervise vendors. 

Read More >

The Calm before a Second ICO Storm?

In 2017-2018, Initial Coin Offerings took the financial industry by storm as an alternative form of raising capital. At the time, the SEC made it clear that ICOs were considered an illegal sale of securities and cautioned investors. Still, despite the well documented risks, investors chose throw money at ICOs with the hopes of getting rich quick. Eventually, the bottom fell out – people lost money, many fraud investigations followed, and the ICO craze completely died down. Recently, one SEC commissioner proposed her plan to resurrect the ICO movement. Might this be the calm before a second ICO storm?

Read More >

Payroll Taxes

As we complete the first quarter of 2020 there are a few requirements for payroll taxes. You must file all quarterly returns which include a Federal 941 and NYS45 (if you are a NY based company). Each time you process payroll, you are responsible for withholding and paying certain payroll taxes.

The employer is responsible for:

• FICA
• Medicare at 1.45% (Uncapped)
• Social Security at 6.2% (Taxed on $132,900 in wages per employee)

• Federal Unemployment Insurance 6% (Taxed on $7,000 in wages per employee)

• State Unemployment Insurance Tax (This percentage varies by state)
• New York New Businesses automatically start at 3.2%

The employer is also responsible for withholding the following from the employee’s paycheck:

• Federal Taxes – Based on the employees W4 selections

• State Taxes - Based on the employees W4 selections

• FICA
• Social Security – Taxed at 6.2% (Up to $132,900 in wages paid)
• Medicare – Taxed at 1.45% (No cap)

*Please note, this is a general outline, depending on where you operate more may be required*

These amounts are all reconciled on the quarterly and annual returns. If you are concerned that you may not be doing this correctly, or if you look at your rates and they seem higher than what is above, please reach out to our Paychex Representative, Elizabeth Drivas, here or at (646) 228-5529.

SDDco SERVICE OF THE MONTH:

TAX COMPLIANCE SERVICES
FOR BUSINESSES AND
HIGH NET WORTH INDIVIDUALS

Tax season is coming to an end. Our tax professionals take an active role in assisting firms like yours to employ tax strategies that meet your business goals and fulfill your tax obligations. To maximize profit and minimize risk, it is essential to integrate tax planning and compliance with business structuring and management.

SDDco-PC knows that time, trust, and expertise matter when servicing high net worth individuals and their families. Our professionals can help identify tax-saving opportunities that lessen and defer present and future tax payments related to charitable donations, income and capital gains tax, and other areas of tax compliance. Additionally, if you are facing complexities associated with international investments; you can count on SDDco-PC’s understanding of foreign regulations to uncover benefits and avoid penalties, so you get the most out of your tax return.

IN THE SPOTLIGHT

Keep a lookout for us at upcoming conferences!

• Empire Startups
• New York, NY | April 1, 2020
• Register Now: https://empirestartups.com
• FINRA ANNUAL
• Washington, DC | May 12-14, 2020
• Register Now: https://www.finra.org/events-training/conferences-events/2020-finra-annual-conference
• NSCP National
• Baltimore, MD | Oct 19-21, 2020
• Register Now: https://national.nscpconferences.org
• FINRA Small Firm
• Santa Monica, CA | TBD

Let’s try to connect!

SDDco Group makes this general information available for educational purposes only, the contents of which were not originated from SDDco. SDDco is not affiliated with any of the publishing persons or entities of the articles herein. The information provided should not be construed as legal advice. This email may constitute an advertisement under U.S. law.

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