Oct. 30, 2023
Matthias POMPE 29 Oct 2023, 21:25 (4 hours ago) to me Dear Securities and Exchange Commission, I am reaching out today to share my reservations regarding the potential economic consequences of the recently proposed rule modification presented by the Securities Exchange Commission (SEC). Although the intent behind this alteration aims to boost investor security via more detailed disclosures relating to advisory services, its far-reaching implications could impose hefty expenses on firms and negatively affect market competition. To begin with, the recommended revisions entail considerable escalations in document preparation obligations. As per the suggested regulation, annually, advisors shall submit a statement encompassing all transactions pertaining to individual securities transacted during the preceding fiscal year instead of simply highlighting significant events since the prior summary. In addition, upon selling portfolio assets, advisors would be required to provide immediate notification to customers within ten working days. The heightened level of documentation demanded will consume both human and monetary capital previously directed towards primary company operations. Furthermore, the proposal calls for expanded preservation criteria. Currently, documents may be discarded three years post-production. However, according to the suggested adjustment, such materials should remain accessible up to five years beyond the closing date of the final accounting period covering those products. Additionally, advisors will have to retain all interactions with cooperating organizations participating in managing consumer belongings through the entirety of their associations. Maintaining records detailing several parallel client connections presents a daunting task. Finally, the draft regulation introduces intensive reporting duties that advisors will be forced to perform routinely. Notably, companies must communicate promptly whenever detecting incidents of alleged breach of fiduciary responsibility or cybersecurity misdeeds, even if there is no tangible financial benefit or harm arising from them. Monthly balance sheet comparisons of inventory figures versus data provided by outsourced parties charged with analogous possessions are similarly compulsory. Fulfilling these stringent reporting requirements necessitates vast amounts of labor and concentration, which might divert resources away from vital company processes. Given the magnitude and complexity of these provisions, it becomes imperative to analyze the ramifications of these modifications accurately while taking into account the probable adverse effects on enterprise economics. Specifically, small and medium-sized enterprises (SMEs), who lack the same scale and resources as larger competitors, could struggle to meet these requirements, jeopardizing their competitive edge. Compliance expenditure burdens could escalate exponentially, causing some SMEs to either shutter or reduce staff count, thus adversely influencing employment rates, particularly among support roles like clerks and paralegals. Increased compliance expenditure could lead to higher fees passed down to investors, making financial products less affordable. Eventually, decreasing competitor numbers might foster oligopolistic conditions in certain markets, limiting choices available to consumers. In conclusion, before deciding conclusively on these revisions, the SEC must conduct thorough research and analysis regarding their likely economic repercussions. We request you to make every effort to incorporate feedback from stakeholders representing different perspectives before initiating any decisive steps. If necessary, please do not hesitate to contact us at any point for further inputs or insights. Thank you for your time and consideration. Warmest regards, Mike