FEA Petitions for Federal QI Standards

Washington, DC —The Federation of Exchange Accommodators , the national trade organization representing exchange facilitators and others involved in 1031 exchanges, has petitioned the Federal Trade Commission to implement federal regulation of the QI industry. It has done so in an effort “to protect consumers” by putting “safeguards in place to measure the competency of professionals executing 1031 exchanges as well as financial safeguards for consumers and FTC enforcement protocols,” according to an announcement from the FEA.

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.