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Joint Trade Associations Letter to the SEC Regarding Safeguarding Advisory Client Assets Proposal

MFA, along with other financial services and fund industry associations, submitted a joint trade association comment letter to the U.S. Securities and Exchange Commission (SEC) regarding it’s proposed rule, Safeguarding Advisory Client Assets. The associations highlight their support for the SEC’s goal of investor protection, but believe the current form of the proposal conflicts with this goal and would have various negative impacts on investors.

In the letter, the associations outline several fundamental changes proposed by the SEC, including requiring custodians to segregate client assets in a manner that conflicts with existing regulatory frameworks, creating an overly broad definition of “custody,” and expanding the scope of the custody rule to cover various assets. The associations argue that these changes would result in higher fees, disrupt banking models, slow down payment and settlement cycles, and create significant burdens on investment advisers. They also highlight potential negative impacts on prime brokers, real estate investment strategies, annuities, futures, derivatives, and emerging markets.

The associations suggests that the SEC withdraw and re-propose the proposal if material changes are made to it, as this would allow the public to provide feedback on those changes and maintain the integrity and quality of securities markets and regulations. They also emphasize the need for a holistic analysis of the cumulative effects of recently proposed rules that could interact or conflict with the proposal.