IRS Provides Alternative Method for Nonbank Trustee Rule Compliance

The Internal Revenue Service (IRS) has issued Notice 2026-32, titled “Alternative Method for Carrying Broker-Dealers to Comply with Certain Nonbank Trustee Rules”. The Notice prescribes that a broker-dealer that carries customer accounts and receives or holds funds or securities for those customers (a carrying broker-dealer) may, in lieu of satisfying the net worth requirement for nonbank trustees under Treasury regulations, demonstrate satisfaction under the SEC Net Capital Rule (15c3-1) and SEC Customer Protection Rule (15c3-3). The trustee of an IRA must be a bank as defined in Internal Revenue Code Section 408(n) or someone as a nonbank trustee who satisfactorily demonstrates to the Secretary that the trust will be administered consistent with requirements imposed by Treasury regulations.

The IRS notes that the SEC Net Capital Rule and Customer Protection Rule address the same core financial responsibility concerns imposed by the Treasury Department, that carrying broker-dealers are subject to substantial oversight under these rules, and that the requirements are comparable. Thus, a carrying broker-dealer may demonstrate satisfaction of both the SEC Net Capital Rules and Customer Protection Rule in lieu of demonstrating satisfaction of the adequacy of net worth requirement for nonbank trustees. The Treasury Department and the IRS anticipate updating the procedures for nonbank trustee applicants that are carrying broker-dealers that want to demonstrate satisfaction of both the SEC Net Capital Rule and Customer Protection Rule in lieu of the adequacy of net worth requirement.