If you want to find out about the disciplinary history of the investment firm or the individual who handles your money, how do you go about it? How difficult is it to find the information?

One way to do this is to look for the CRS (Client or Customer Relationship Summary) on the firm's website. The CRS is a U.S. Securities and Exchange Commission-mandated disclosure document of either two or four pages, depending on the firm's business model.

Let's use a large, well-known firm as an example. Go to the Merrill Lynch website (tinyurl.com/y27pzpke). Look for this line: "For more information about our brokerage services and investment advisory programs, see ml.com/CRS."

Once you open the CRS, look for the "disciplinary history" section. In the case of Merrill's four-page CRS (dated March 22, 2024), on the fourth page, highlighted in dark blue, you'll see this question: "Do you or your financial professionals have legal or disciplinary history?" If the answer is "yes," the CRS states: "Please visit Investor.gov for a free and simple tool to search for us and our financial professionals." Investor.gov is a website maintained by the SEC.

You would think that the link would open up the firm's disciplinary history (the SEC should make this easier). Look for a large picture box titled "Check Out Your Investment Professional." In the box's search bar, you'll enter the name of the firm or an individual.

To find Merrill's disciplinary information, simply entering the search term "Merrill" won't get you what you want. Nineteen results populate the dropdown menu. Choose "Merrill Lynch, Pierce, Fenner & Smith Incorporated."

Click on the profile in the dropdown menu, where you will find two "Get Details" links. Since Merrill is a dual registrant, you'll see "Investment Adviser Firm," which opens Merrill's Investment Adviser Public Disclosure (IAPD) profile (tinyurl.com/ms58cvm3), as well as "Brokerage Firm," which directs you to Merrill's BrokerCheck profile (tinyurl.com/mbkm8uwe).

Dual registrants are regulated under two different statutes -- one for broker-dealers, the other for investment advisers. A single financial professional working for a dual registrant can also be a registered representative (broker) and an investment advisory representative.

Customers need to be aware of the distinction, a subject I covered in my latest book, "The Discerning Investor." Write to me (readers@juliejason.com) if you would like me to discuss this topic in a future column.

To find the disciplinary history for a company's investment adviser services, on the IAPD profile you can:

1. Select "View Form ADV By Section" in the menu on the left-hand side of the webpage. Then select "Item 11: Disclosure Information" for a general review of disciplinary history. For more detailed disclosures, select "DRPs" (Disclosure Report Pages).

2. Click "Part 2 Brochures," which takes you to a page with links to download firm brochures (ADV Part 2A).

For the disciplinary history of a firm's brokerage services, you can download a "detailed report" from its BrokerCheck profile that will inform you of disciplinary actions under "Disclosure Events."

The Disclosure Events section states that "All firms registered to sell securities or provide investment advice are required to disclose regulatory actions, criminal or civil judicial proceedings, and certain financial matters in which the firm or one of its control affiliates has been involved."

Each disclosure is listed separately, including the status of the disclosure (pending, on appeal or final), the allegations related to it, the resolution and any possible sanctions.

You will want to take your time reading through the listings, as they can provide some insights into a firm's culture. The same goes for an individual. You're looking for patterns.

Going back to Merrill's CRS, you'll see an "Additional Information" section after the disciplinary history. It offers a copy of their Best Interest Disclosure Statement, which "provides information about the scope and terms of the brokerage services" Merrill offers, describing "approach, services, fees, compensation and conflicts of interest" (tinyurl.com/3nerd8j3).

Again, researching this information does take time. The tools provided may not seem intuitive or user-friendly, and the process to access this information may often seem unclear, especially if you are unfamiliar with this industry. Disclosures can be lengthy, with some over a thousand pages. However, it is your money that is involved, so the time is worth it.

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If you own mutual funds outside of your retirement accounts, don’t forget to check on upcoming capital gains distributions. You may still have time to avoid paying taxes on those gains, depending on your funds’ record dates. Whether that is a good strategy for you will depend on your “big picture tax plan.”

Mutual funds buy and sell their holdings throughout the year. If those holdings do well, great. But it’s not so great at tax time if the fund sells holdings for a profit.

How can that be?

“When a mutual fund sells securities that have appreciated in value and the fund doesn’t have any offsetting capital losses, it must distribute those gains, as well as any dividends or income payouts, to shareholders,” quoting Morningstar, a U.S. financial services firm (tinyurl.com/5fwr443z). “Shareholders, in turn, are required to pay taxes on the gains (assuming they don’t have any offsetting capital losses in their own portfolios).”

Bottom line: Capital gains distributions from your mutual funds (not held in retirement accounts) will be subject to taxation to shareholders.

While this may seem unlikely, “you may have to pay taxes on these [capital gains distributions] even if you didn’t sell a single share, and even if you reinvested the income or capital gain right back into the fund and never received a check,” quoting Morningstar.

Do capital gains distributions matter to investors? Sometimes, they can be significant. According to Morningstar’s “Ready for a Big Capital Gains Tax Bill?” (tinyurl.com/38x2rwd3), leading the list of funds with high distributions “is Morgan Stanley Institutional Dynamic Value MAAQX, which is slated to distribute more than 50% in capital gains. Five other strategies are distributing more than 40%.”

The capital gains distribution for MAAQX is scheduled to be paid on Dec. 11, 2024, for shareholders of record as of Dec. 10, 2024, according to Morgan Stanley’s “Estimated 2024 Year-End Distributions,” which you can find online at tinyurl.com/2a47be62.

Note that the total gain is estimated at $6.33 per share, of which $5.65 is short term and $0.68 is long term. These are estimates and can change. The current price per share as of this writing (11/21/2024) for the fund is $12.35.

“The status of any capital gains distributed to shareholders (i.e. whether or not they are considered short-term or long-term) depends on how long the fund owned the securities that produced the gain -- not how long the shareholder owned shares in the fund,” quoting J.P. Morgan Asset Management’s 2024 Dividend and Capital Gain Schedule (tinyurl.com/55hdrx6k).

You can look up each of your funds’ estimated 2024 year-end distributions by searching online for the funds you own. Another example is Vanguard’s, at tinyurl.com/2m9fx9xe.

For example, Vanguard’s Balanced Index Investor fund expects to distribute 2.81% on Dec. 31, 2024, to shareholders of record as of Dec. 17, 2024.

The Vanguard list was created on Oct. 31, 2024, and does not include those funds (such as Vanguard’s S&P 500 Index Fund) that are not expected to distribute capital gains in December.

The estimate will provide a list of funds that expect to pay capital gains distributions “to shareholders of record.”

As for taxes, “Net capital gains are taxed at different rates depending on overall taxable income, although some or all net capital gain may be taxed at 0%,” quoting the IRS (tinyurl.com/yzh8dtfd). For 2024, the taxable income brackets for married filing jointly are (0%) $0 to $94,050; (15%) $94,051 to $583,750; and (20%) $583,751 or more, whereas for single filers they are (0%) $0 to $47,025; (15%) $47,026 to $518,900; and (20%) $518,901 or more (tinyurl.com/5n6ua9df).

Before deciding to sell a fund before the record date to avoid the capital gains distribution, you’ll want to assess your tax situation with your tax adviser. Getting out to avoid the distribution may or may not be advisable. In fact, you may be worse off if the sale generates a big capital gain if you have a profit (for example, you bought the fund for $5 a share and now it’s worth $15).

On Wednesday, Dec. 4, I will be speaking on Integrating Financial & Estate Plans as part of my Retirement Planning presentation series offered through the Greenwich Library. To register, please visit www.juliejason.com/speaker/upcoming-events.

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Offering benefits to both retirement investors and charities, QCDs (qualified charitable distributions), are a favorite topic of mine, especially when speaking with nonprofits or presenting to lawyers in continuing legal education programs. For those who don't know, QCDs are charitable donations made directly from IRAs.

First, let me address charities: Does your population of potential donors include IRA owners? Are any over age 73, the mandated age for starting to take forced withdrawals that are taxable as income (RMDs, or required minimum distributions)? These individuals may wish to avoid taxes on their RMDs while benefiting you, the charity, with a donation -- if only they knew about QCDs.

Now, donors: While donors can make QCDs at age 70 1/2, I'd like to talk with you if you are older (73+) and you have not taken your IRA's RMD yet for 2024. Have you thought of donating some or all of your RMD to charity? The QCD may save you money at tax time while also serving your charitable interests.

Put those two demographics together and you have a winning combination. The retired IRA owner wins. The fundraising charity wins. And the timing could not be better for this particular situation: If IRA owners have not taken RMDs for 2024 as of yet, November is the perfect time to arrange a QCD for 2024.

Potential Donors: According to IRS income tax statistics, there are millions (perhaps as many as 27 million) of QCD candidates based on age and IRA ownership (tinyurl.com/42y8e7rm).

Age: Unlike the age limit for RMDs, which has advanced via legislation since 2019 from 70 1/2 years old to the current age of 73, the age for making a QCD remains age 70 1/2.

Dollar Limit: The maximum upper limit for 2024 is $105,000, increasing to $108,000 for 2025. There is no lower limit.

The Charity Must Be Qualified: Use the IRS Tax Exempt Organization Search Tool at tinyurl.com/497um8xp to see if a charity qualifies.

Payment to the Charity: Payment must follow QCD rules. The governing statute (section 408(8)(B) of the Internal Revenue Code) mandates that the distribution be "made directly" to the charity "by the trustee" of the IRA.

Checks: Now that IRA trustees (custodians) offer check writing on IRA accounts, the question has come up about whether an IRA owner can simply write an IRA check to the charity.

That can work. "Writing a check, drawn from the account but payable directly to the charity, is functionally equivalent to the account owner requesting that the trustee issue a cashier's check payable to the charity," according to an IRS spokesperson.

What would not pass muster? "An IRA distribution, such as an electronic payment made directly to the IRA owner, does not count as a QCD. Likewise, a check made payable to the IRA owner is not a QCD" (tinyurl.com/mvjxezz9), according to the IRS spokesperson.

Checks at year-end: Follow QCD rules. If you don't, your "QCD" could fail. Be sure to engage your tax adviser and the charity of your choice that will receive your donation. Read IRS Publication 590-B at tinyurl.com/ysyp697p.

Time Pressure: It's November -- time for potentially millions of charitably inclined IRA owners, especially those 73 or older who need to do RMDs, to save on taxes while benefiting charities of their choice.

December: Don't wait until the last week of December. "Use of a check near the end of the year might run the risk that the transfer to the charity from the IRA is not completed before year-end," said Mark Luscombe, principal analyst at Wolters Kluwer Tax and Accounting. "The QCD must be withdrawn from the IRA before year-end, so the check has to clear before year-end." Also, be sure to get a written acknowledgement from the charity that it received the contribution.

A note to charities: If you and your team aren't familiar with QCDs, I'm happy to point you in the right direction as part of my pro bono financial literacy efforts. In addition, I have posted some resources on my website (https://juliejason.com/column-resources), including examples of nonprofits that offer donors the opportunity to do QCDs.

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