In their boldest, hard line action to date, the Federation of Exchange Accommodators, 1031 Exchange Industry’s sole professional organization, has petitioned the Federal Trade Commission to “adopt a regulation that would apply the force of federal law to accepted industry standards and conduct that are intended to protect consumers who engage the services of exchange facilitators.”
According to Smartmoney.com, the historic significance of this petition is to put safeguards in place to “measure competency” of qualified intermediaries, financial safeguards for consumers, and Federal Trade Commission standard operating procedures in cases of enforcement.
The following is the guts of the petition presented by Smartmoney:
Exchange Facilitators Must Demonstrate Competency
“– An exchange facilitator must first register with the
Commission, providing specific identifying information, and
the results of a national fingerprint background check for
In my opinion this safeguard is long over due. As when you are fingerprinted for your driver’s license, QI’s should be forced to provide fingerprints, voiceprints, and while we are at it maybe even DNA samples.
“– A facilitator must designate and maintain an exchange
facilitator officer (e.g., an attorney, CPA or individual with
at least three years experience as a facilitator) who has
demonstrated experience and training to act as an exchange facilitator.”
In my opinion the FEA’s Certified Exchange Accommodator’s certification should be mandated by the FTC as a requirement to be fulfilled by these “designated” facilitators.
“– An exchange facilitator would have 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.”
Any safeguard that will “preserve the principle of exchange funds” will then protect consumers.
“– A facilitator would have to maintain certain specified levels
of insurance, bonds, letters of credit, and/or deposits.”
In my opinion this is a natural safeguard but has it really been as effective a safeguard as background investigations of potential Qualified Intermediaries?
Federal Trade Commission
“– Must review applications for compliance with the registration
requirements. Authorized to revoke or suspend a registration
for misrepresentations, failing to account for property
belonging to others, or deceptive conduct.”
This is the “teeth” of the petition in my opinion. If the FTC will step up and levy heavy fines, pursue criminal proceedings, and revoke licensing, then the 1031 Industry will restore order and consumer confidence.
If you have any information or opinions on this developing story between the FEA-FTC and the 1031 Exchange industry please comment or write to Dean Guadagni at email@example.com