Oct. 30, 2023
The proposed SEC Release No. IA-6240; File No. S7-04-23 purportedly seeks to strengthen investor protections, yet it fails to consider the potential negative impacts on the broader public interest. While some provisions may serve laudable goals, others risk limiting access to financial services, especially for underserved communities who rely heavily on open-ended mutual funds. For instance, requiring RICs to prepare and distribute audited statements before their shareholder meetings could pose significant operational challenges, ultimately resulting in delayed distributions or reduced flexibility for retail investors. The subsequent increase in costs due to these additional preparatory steps will inevitably be passed onto customers, thus making investing relatively more expensive for ordinary citizens. Furthermore, the added complexity may hinder the growth prospects of smaller businesses, which frequently utilize RIC structures to raise capital from retail investors. By raising barriers to entry and forcing entrepreneurs into more costly alternatives like private equity or debt financing, this proposed rule could impede innovation, stifle competition, and diminish opportunities for aspiring enterprises across various industries. Therefore, it is imperative that policymakers carefully weigh the intended benefits against potential drawbacks and ensure that new rules promote equitable access to capital markets without inflicting unwarranted harm upon the very individuals they intend to protect.