SEC to reopen public comment on investment advisers proposal

The Securities and Exchange Commission today announced that it would reopen the public comment period for a proposed rule that seeks to enhance protections of customer assets managed by registered investment advisers. The proposed rulemaking would broaden the application of the current investment adviser custody rule beyond client funds and securities to include any client assets in an investment adviser’s possession or when an investment adviser has authority to obtain possession of client assets, according to the agency. Like the current rule, it would entrust the safekeeping of client assets to qualified custodians, including certain banks or broker-dealers.

The initial comment period ended on May 8. With today’s decision, the SEC will take comments for an additional 60 days after the date of publication of the reopening in the Federal Register. The agency said the expanded time for comments would allow interested parties more time to analyze the issues and prepare comments.

The American Bankers Association, ABA Securities Association and two other trade groups in May urged the SEC to withdraw the rule and re-propose it to more directly address specific instances where the current rule fails to ensure appropriate investor protection. “The proposed rule suggests broad and complex changes that represent a fundamental departure from current industry practice, and, if finalized, would cause significant harm to investors and financial markets,” the groups said.