Oct. 28, 2023
As somebody deeply invested in the finance industry, I vehemently oppose the Securities and Exchange Commission's (SEC) latest proposal known as "Safeguards for Changing Custody of Assets." While the intention behind the proposal appears to be protecting clients' assets during custodial transitions, the execution leaves much to be desired. To start with, the plan would introduce excessive administrative burdens onto smaller organizations, putting them at a competitive disadvantage. This move could hinder innovation and development within our field since those hit hardest by the new rules are often startup companies trying to establish themselves. It's unfair that established players get away with lesser scrutiny compared to newer entrants. Additionally, the proposal fails to take adequate account of privacy issues. The suggestion to notify clients repeatedly upon changes in custody runs counter to common sense. Overloading clients with documents they neither need nor want will simply serve to confuse and overwhelm them. Furthermore, this measure risks exposing private information about investments to potential hackers or scammers. Finally, the SEC's proposal appears to go against standard practices adopted by other notable regulatory bodies globally. For instance, Financial Industry Regulatory Authority (FINRA), another prestigious watchdog organization, permits its members greater flexibility when transferring client assets between sanctioned depositories with fewer demands for paperwork. Such disparity could give rise to conflicts between differing governing structures, resulting in substantial increases in expenditure necessitated through duplicated initiatives required to adhere to multiple legal systems. Given these apparent shortcomings, I strongly recommend that the SEC reconsider its stance on this matter. If not withdrawn entirely, I urge them to revise the proposal substantially so that it better reflects current realities and mitigates negative impacts on smaller firms, client privacy, and global harmony. Otherwise, this plan will turn out to be a catastrophically ill-conceived decision that does nothing good for the industry as a whole.