Oct. 30, 2023
Here are some potential arguments against the proposals in the linked Federal Register document: The proposed changes significantly expand the definition of a broker, which could lead to overregulation of certain types of financial professionals that provide services to clients. Requiring natural persons who provide securities transaction advice "regularly" to register as brokers is vague and could capture individuals who provide advice occasionally versus continuously. This creates regulatory uncertainty. Lowering the de minimis number of transactions threshold to five could force more people to register as brokers when they are not necessarily acting as full-service brokers. This imposes regulatory costs on smaller players. The proposed rules expand the definition of broker to include robo-advisors and other automated digital advice tools. This could stifle innovation in digital financial services. Broker-dealer registration and regulations are meant for intermediaries executing trades on behalf of clients. Most robo-advisors do not execute trades so should not be covered under the broker definition. The proposed rules fail to align with the reality of modern finance, where technology enables more individuals to provide specialized advice or services without needing to register as brokers. The SEC should take a principles-based approach to defining brokers rather than relying on prescriptive transaction thresholds which are arbitrary and rapidly outdated. Overall, the proposed changes could unintentionally expand SEC regulation over financial advice relationships that are already working well without broker-dealer registration. This imposes costs without clear benefits.