The OCC Unique and Hard-to-Value Assets: Overview of Changes. PDS Systems, Inc. March 19, 2014

Transcription

1 The OCC Unique and Hard-to-Value Assets: Overview of Changes PDS Systems, Inc. March 19, 2014

2 A Basic Overview: Mineral, Oil and Gas Assets - What Every Fiduciary Should Know Thursday, April 10 th 12:50 p.m. CDT Reg. 9 Review of Fiduciary Accounts Thursday, April 17 th 1:00 p.m. CDT What Every TOLI Trustee Needs To Know About Life Insurance Underwriting Tuesday, April 29 th 1:00 p.m. CDT Mineral, Oil and Gas Assets - Fiduciary Management Wednesday, May 14 th 12:50 p.m. CDT

3 Purpose First in a Series Overview of the UHTV Landscape to: establish common terms create a frame of reference Valuation is common concern for all UHTV

4 You don't have to be the Dalai Lama to tell people that life's about change. John Cleese Writer, Actor & Tall Person

5 What Is A Unique And Hard-to-Value Asset UHTV Assets Real Estate Mineral, Oil & Gas Closely Held Businesses Loans and Notes Tangible Assets Collectibles

6 What Is A Unique And Hard-to-Value Asset Real Estate Residential Single & Multi- Family Commercial Retail Office Hotel Industrial Agricultural Farm & Ranch Timber Special Purpose / Vacant Land / Development Site Leaseholds

7 What Is A Unique And Hard-to-Value Asset Real Estate Ownership Fee Simple Life Estate Future Interest Contingent Interest Lienholder Easement Holder Power of Appointment Beneficial Ownership under a real estate contract

8 What Is A Unique And Hard-to-Value Asset OCC Sub Categories of Interest Commercial Real Estate Leases Farm and Ranch Timber

9 What Is A Unique And Hard-to-Value Asset Mineral, Oil and Gas Mineral/Royalty Working Interest Mining Claims

10 What Is A Unique And Hard-to-Value Asset Closely Held Businesses Partnership or General Partnership Limited Partnership (LP) Limited Liability Company (LLC) Limited Liability Partnerships (LLP) Joint Venture (JV) Sole Proprietorship Closely Held Corporation

11 What Is A Unique And Hard-to-Value Asset NOT Closely Held Businesses Family Limited Partnerships Other entities formed for estate planning purposes

12 What Is A Unique And Hard-to-Value Asset Loans and Notes Unsecured (Estate Planning Loans) Secured

13 What Is A Unique And Hard-to-Value Asset Tangible Assets Cars Boats Planes Household Furnishings

14 What Is A Unique And Hard-to-Value Asset Collectibles Art Memorabilia Stamps & Coins Precious Metals Gemstones

15 What Is A Unique And Hard-to-Value Asset What Did the OCC Miss Intellectual Property Rights more prevalent and valuable analogous to mineral rights: difficult to find and establish ownership Hard to verify the sufficiency of payments Alternative Investments not common but usually complex and valuable difficult to value

16 How and When They Occur Legacy After-discovered Acquisition

17 Australia, meanwhile, has raised its security level from "No worries" to "She'll be right, Mate." Two more escalation levels remain: "Crikey! I think we'll need to cancel the barbie this weekend!" and "The barbie is cancelled." So far no situation has ever warranted use of the last final escalation level. John Cleese Writer, Actor & Tall Person

18 What Is Their Economic Impact 10,000 people a day are turning 65

19 What Is Their Economic Impact Economic Impact Non-Institutional Real Estate in excess of $900 Billion and 12% of GDP Value of Oil and Gas held by individuals: $80 Billion

20 What Is Their Economic Impact Fees Not Specifically Addressed by OCC Unbundled Vs. Bundled By Asset Class

21 What Is Their Economic Impact Costs Marshalling Management Distribution

22 What Is Their Economic Impact Risks Ownership Safekeeping Reputational

23 What Is Their Economic Impact Insurance If you can get it, You should have it.

24 History and Transitional Role of OCC Governance 12 th Century Trust law developed to transfer land State law governed trusts initially Move away from state oversight begins with UPIA in 1931 Federal oversight grows with interstate banking Completed with Prudent Investor Act in 1994 OCC Asset Management Handbook in 2000 OTS class specific handbooks in 2001

25 History and Transitional Role of OCC Governance The Impact of the OTS Guides were asset class specific and included exam guidelines This led to a widespread consistency of approach

26 History and Transitional Role of OCC Governance How Corporate Fiduciaries Have Dealt With OCC and Unique and Hard-to-Value Assets Examinations Reg. 9 Annual Reviews Valuations

27 History and Transitional Role of OCC Governance Unique and Hard-to-Value Assets Booklet of August, 2012 What has changed, what did not, and what is left unsaid. Management Guidelines Valuations Risk Assessment Evolving Landscape

28 The really good idea is always traceable back quite a long way, often to a not very good idea which sparked off another idea that was only slightly better, which somebody else misunderstood in such a way that they then said something which was really rather interesting. John Cleese Writer, Actor & Tall Person