The American Bankers Association and two dozen industry groups today urged the Securities and Exchange Commission to reject proposed rulemaking on safeguarding advisory client assets, saying the changes under consideration would result in “a myriad of negative impacts on investors,” including on their access to various services, assets and markets with well-established rules and procedures.
The FDIC proposal would broaden the application of the current investment adviser custody rule, expanding its coverage from funds and securities to all client assets, as well as amend the definition of a qualified custodian and make several other changes. In their letter, the groups said they support the commission’s goal of ensuring high levels of investor protection, but the proposal in its current form makes changes to the custody framework without a clear policy rationale. The American Bankers Association and two dozen industry groups yesterday urged the Securities and Exchange Commission to reject proposed rulemaking on safeguarding advisory client assetsAmong its problems, the proposal would result in higher fees for custodial services, effectively prohibit advisory clients from investing in assets such as physical commodities, and create substantial new obligations for independent accounting firms that would drive up audit costs and possibly limit the availability of services, they said.
“For these reasons, we urge the commission not to adopt the proposal in its current form,” the groups said. “Further, any future proposed rulemaking should be based on an updated economic analysis that accounts for all relevant costs, narrowly tailored to specific instances where the current custody framework has demonstrably failed to protect investors from loss or misappropriation of traditional assets, and developed in close consultation with the primary regulators of the impacted entities, markets and products.”
