Oct. 30, 2023
Hello, There are a some obvious potential downsides or negatives this proposed SEC rule could have for US investors: There will be an added compliance costs for investment advisers - Advisers may pass these costs to investors through higher fees. Limits advisers' flexibility & discretion - The strict custody requirements could restrict advisers' ability to maneuver client funds for investments. Reduces available investment offerings - Advisers may avoid certain assets/structures, like private equity or complex instruments, that don't fit custody rules. Potentially less oversight for retail investors - By limiting adviser custody, retail investors may get less active monitoring of their accounts. There will be a barrier to entry for new advisers - Startup/smaller advisers may lack resources to meet strict custodial requirements. This could reduce services for smaller accounts - Added costs may make advisers reticent to take on accounts under a certain size. It will hinders advisers' ability to act quickly - Transferring funds through custodian vs self-custody adds delays in acting on investment opportunities. Custody risks don't disappear - Third-party custodians themselves still carry some fraud/theft/failure risks. Sincerely.