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Independence rules apply to loans that you and your immediate family

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members hold, co-sign, or guarantee. Loans from restricted entities

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are generally not permitted unless specific criteria are met.

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The independence rules apply to many different types of loans

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that you and your immediate family members may hold,

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including margin loan accounts and student loans.

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Let’s review these two types of loans in detail.

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Margin Loan Accounts

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Many brokerage and investment accounts, and some digital

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wallets used to hold cryptocurrency, have a margin loan account,

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also referred to as a margin loan feature, that enables the investor

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to borrow against investments in the account by using the securities

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in the account as collateral. This type of borrowing creates a margin loan,

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which is subject to the independence rules.

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Margin loan accounts with restricted entities are not permitted.

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Margin loan accounts need to be reported in KICS as loans within 14 days

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of being established, even if the funds are not used.

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Margin loan accounts associated with brokerage accounts

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need to be manually reported in your KICS account as they

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are not automatically updated in KICS through

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the KICS Broker Import program.

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Individuals are often not aware that their brokerage and investment

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accounts have a margin loan account until a transaction

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takes place that triggers a margin loan.

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To avoid incurring personal independence violations,

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contact your broker or financial advisor for you and your

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immediate family members’ accounts to confirm whether there is a

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margin loan account in place. For digital wallets,

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if you have trouble identifying the lender that would issue the margin loan,

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contact Risk Management - Independence for assistance.

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Also, make sure that accounts with restricted entities do not contain

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a margin loan feature in order to prevent the creation

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of a restricted margin loan.

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Student Loans

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There are certain exceptions in place that allow student loans

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to be held with restricted entities in some cases. You and your

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immediate family members are permitted to obtain a new student loan

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from a financial institution that is a restricted entity,

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as long as you are not a Covered Person to that restricted entity,

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the loan is obtained under normal lending terms,

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conditions and requirements, and the loan is kept current at all times.

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If the lender of the student loan is an SEC restricted entity that

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you later become a Covered Person for, you

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(or your immediate family member)

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may continue to hold the student loan as long as you do not

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make any changes to the terms and conditions of the loan.

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This exception to continue holding the loan only applies to loans

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obtained for you or your immediate family member’s educational expense.

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Loans for which you or your immediate family member

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are the co-signor or guarantor for non-immediate family members’,

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for example, your non-dependent niece’s,

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educational expenses are not eligible for this exception.

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If the lender of the student loan is an AICPA restricted entity that you

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later become a Covered Person for, you (or your immediate family member)

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may continue holding the loan as long as you do not make any changes

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to the terms and conditions of the loan.

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You must report the lender of all of your and your immediate

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family members’ student loans in KICS within 14 days of obtaining the loan.

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Most student loans are issued by Navient and the

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U.S. Department of Education. If you have reported your student loans

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in KICS under a different entity name, confirm that you have correctly

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identified the lender by reviewing your loan statements or

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contacting the loan servicer, and update KICS accordingly.

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Make sure to report each individual student loan in KICS

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as a separate loan, regardless of whether it is with the same lender.

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For example, if a student receives a new loan each year from the

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U.S. Department of Education, each year’s loan

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needs to be reported as a separate loan in KICS.

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