Oct. 30, 2023
I am concerned about the proposed amendments to Rule 206(4)-2 under the Investment Advisers Act of 1940. While I understand that the proposed rule aims to address how investment advisers safeguard client assets. I believe that it is important that the government does not overreach into my privacy and my freedom to transact. The proposed rule imposes broad new surprise exam and account statement delivery requirements on investment advisers that present serious dangers of overregulation, operational disruption, and excessive costs that undermine their merit. The vastly expanded custody definition would trigger new regulatory burdens on advisory firms where risks are minimal. Low-risk activities like limited fee withdrawals being deemed custody exposes the flaws in the SEC’s sweeping approach. Layering surprise exams on advisers who present little risk of misappropriation borders on irrational regulatory overreach. Disrupting long-standing custodian-adviser relationships by rigidly mandating statement delivery details creates dysfunction where none exists today. It adds costs clients will bear. Even more concerning is this false sense of security from snapshots of exams and prescribed statement delivery. Savvy malfeasance shifts to where the light isn’t shining. Misguided rules breed compliance theatrics, not real protections.