The following Letter Type C, or variations thereof, was submitted by individuals or entities.

Letter Type C:

Comments submitted for: Safeguarding Advisory Client Assets; Reopening of Comment Period

The rule proposes fairly expansive policies and procedures investment advisers would need to implement related to custody of client assets. This will require dedicating compliance resources.
The new requirements for written notifications when third-party custodians are used may be excessive. Requiring written notice each time assets are transferred could overwhelm clients with paperwork that they may ignore. This could undermine the intent.
Stricter rules about when firms can have custody of client funds could make certain business models difficult to operate. For example, advisers to private funds may find it harder to take custody for legitimate purposes like paying fund expenses.
The limits on operational control of client accounts could make it harder for firms to provide comprehensive wealth management services that clients expect. This could reduce consumer choice.
New compliance costs and liability risks could deter smaller financial advisers from staying in business or entering the industry. This could lead to concentration among larger firms and reduced competition.
Prescriptive asset verification requirements could create significant costs by requiring duplicate account statements to be sent. This added burden provides limited benefit beyond existing protections.
The tightening of exemptions for things like payment of fees from accounts seems unnecessary given lack of evidence of widespread problems. This could increase costs without meaningful benefits.
Overall, while aiming to enhance protections, the rule seems to lack nuance and could negatively impact market competition, innovation and costs without clear evidence it would meaningfully improve safety. A more principles-based approach may better balance competing considerations.


Document Type: 
Proposed Rule 
Document Citation: 
88 FR 59818 
Page: 
59818-59820 (3 pages) 
CFR: 
17 CFR 275 
17 CFR 279 
Agency/Docket Numbers: 
Release No. IA-6384 
File No. S7-04-23 
RIN: 
3235-AM32 
Document Number: 
2023-18667