Oct. 30, 2023
Dear Members of the SEC I am writing to express my concerns regarding the recently proposed rules Safeguarding Advisory Client Assets; Reopening of Comment Period. Number S7–04–23 Implementing these measures create new burdens and costs for smaller firms, which could ultimately lead to reduced competition and less diverse options for retail customers. Additionally, the proposals may impose unnecessary restrictions on RIAs and limit the flexibility they currently enjoy to manage their clients' portfolios. Having more diverse options for retail customers is crucial because it provides them with a wider range of choices and enables them to make informed decisions based on their individual needs and preferences. Diversity in investment products and services allows retail customers to select from a variety of strategies, styles, and approaches that align best with their financial goals and risk tolerance levels. This promotes healthy competition among investment advisors and financial institutions, driving innovation and improving overall service quality while providing retail customers with better value propositions. Moreover, having multiple options helps mitigate risks associated with overconcentration in one product or strategy, thereby offering retail customers enhanced portfolio diversification benefits. Therefore, ensuring that smaller firms continue to operate competitively through reasonable regulatory frameworks becomes essential to preserve customer choice and foster market dynamism. Reserving customer choice and fostering market dynamism through reasonable regulatory frameworks is important to the U.S. Because it supports economic growth, increases competition, and enhances investor protection. By promoting a level playing field for all types of investment advisors, regardless of size, the regulatory framework ensures that small businesses can compete fairly against larger ones without being unduly burdened by compliance requirements. This encourages innovation, spurs efficiency gains, and results in higher-quality products and services offered to retail customers. Additionally, increased competition leads to lower fees and commissions charged to investors, making it easier for people to save money and grow their wealth. Lastly, by preserving customer choice, investors have access to a broader array of investment opportunities tailored to suit different needs, preferences, and objectives, helping them achieve optimal returns within an acceptable level of risk. Overall, maintaining reasonable regulatory frameworks is critical to preserving the integrity, vibrancy, and resilience of the U.S. Capital markets ecosystem. For the United States it will place the country's regulatory regime among some of its peers globally, including Canada, Australia, and the European Union, where similar standards apply to RIAs managing retail clients' assets. However, compared to other jurisdictions like Hong Kong, Singapore, and Switzerland, which do not impose similar stringent requirements on RIA firms, the new proposed rules may make the U.S. Market less attractive for foreign players looking to establish operations here, particularly those that manage relatively smaller client portfolios. Consequently, the implementation of more rigorous safeguards could lead to a shift towards offshore alternatives, resulting in lost revenue and opportunities for American firms catering to international clients. Here are my very concernes: "regulatory burden". The proposed regulation imposes significant operational complexities and financial obligations on investment advisors, especially those managing smaller private funds. These increased costs and challenges could translate into higher fees for clients, making it more difficult for investors to obtain affordable financial advice. Furthermore, the added regulatory load could discourage some individuals from pursuing careers in the industry, exacerbating talent shortages in this critical area. Ultimately, excessive regulatory burden undermines entrepreneurship, innovation, and economic growth, thereby detracting from broader societal welfare. Therefore, regulators must weigh the benefits of any new proposals carefully against their potential drawbacks, ensuring that the net effect remains favorable to society as a whole. In light of the current pandemic crisis, striking an optimal balance between regulatory protection and economic efficiency has become even more imperative than ever before. "regulatory creep". This refers to the gradual expansion of regulatory authority beyond its original mandate. While safeguarding assets is a legitimate objective, the proposed regulation appears to extend regulatory oversight over areas that have traditionally been outside the purview of securities laws. This trend towards mission creep could lead to unnecessary duplication of efforts, conflicting mandates, and wasted resources. It also creates uncertainty and inconsistency in the legal landscape, raising the cost of compliance for both regulated entities and authorities alike. Consequently, careful attention needs to be paid to ensure that the regulatory boundaries remain clearly defined and appropriately scoped. By doing so, stakeholders can enjoy the benefits of enhanced investor protection without suffering from the adverse effects of regulatory overreach. Regarding the topic under discussion, namely the problematic concept of 'regulatory creep,' I would like to emphasize how crucial it is to exercise caution when considering proposals such as the Safeguarding Advisory Client Assets; Reopening of Comment Period. Whilst we appreciate that regulatory endeavors aimed at safeguarding investors and maintaining financial stability are necessary, we must guard against any attempts to expand regulatory duties excessively beyond what was initially envisaged. The escalating nature of regulatory creep represents a serious threat to businesses operating in the field since it results in disproportionately high expenses and cumbersome compliance requirements that could deter investment and restrict innovation. Although regulatory frameworks inevitably shift according to several variables, including technology developments, novel hazards, and changing company structures, we need to stay alert and active concerning mitigating its damaging impacts. Through a careful appraisal of the advantages and disadvantages of every suggested measure, we can identify those most likely to serve the general welfare and produce beneficial social outcomes. Our primary mission remains steadfast: balancing prudential supervision with enterprise viability, fostering prosperous economies while lowering costs and complexity wherever possible. Thus, let us bear in mind our responsibility to protect the health of our country's financial systems while keeping regulatory barriers to a minimum. Please take these comments into consideration. This is very important. Kind Regards Uta Henns