Oct. 28, 2023
I am a budding entrepreneur hailing from the vibrant startup scene of California, and I am apprehensive about the looming impacts of the SEC's proposed Rule Release No. IA-6240; File No. S7-04-23. One major issue is the undue burden it places upon small businesses. With the added expenses and administrative tasks necessary to conform to this regulation, our meager financial resources will be stretched thin. This puts us at a disadvantage compared to more well-funded competitors, forcing us to make tough decisions that negatively affect our bottom line - either inflating prices for customers or sacrificing profits. Another cause for alarm is the apparent redundancy inherent within this proposal, which seems to duplicate several mandates set forth by other regulatory organizations such as FINRA and local Securities Commissions. This results in an uneven playing field where multiple, conflicting regulatory structures exist side by side. This complexity poses challenges for both regulating authorities and firms alike, ultimately hampering efficiency and causing frustration. Furthermore, some detractors claim that the proposed rule offers scant practical benefits to either investors or advisors, specifically regarding the requirement for excessively detailed records and documentation. After all, infractions involving mismanagement of customer assets are comparatively scarce occurrences. Critics deem this extra work superfluous since it adds no significant value to current security protocols. In addition to these points, others voice technical objections, citing confusion over specific terminology utilized within the proposal, including 'Custody' and 'Private Fund.' These misunderstandings generate ambiguity and uncertainty when attempting to apply the law, thereby complicating its effective implementation. Moreover, Non-US based advisors express anxiety regarding the prospect of greater compliance expenses coupled with disparities between US and global accounting conventions/legal systems, impairing their capacity to transact business in America.