Industry trade groups are calling on the U.S. Securities and Exchange Commission (SEC) to reconsider proposed reforms to custody rules, arguing that they will have negative side effects.
In a letter to SEC chair Gary Gensler, the 26 trade associations, including the U.S. Securities Industry and Financial Markets Association, lobbied against revisions to the custody rules that were published for a second comment period on Aug. 30.
“We support the commission’s goal of ensuring high levels of investor protection, including the safety of client assets from potential misuse or loss. However, in its current form, the proposal is in conflict with that goal as it will result in a myriad of negative impacts on investors including their access to various assets and markets with well-established rules and procedures,” the organizations said in their letter.
Among other things, they argued that the proposals would duplicate existing safeguards that are already imposed by U.S. banking, derivatives and insurance regulators, along with existing SEC requirements.
“Where the commission can identify shortcomings that have failed to protect investors from loss or misappropriation of traditional assets, it should propose changes, based on a careful evaluation of the issues identified by commenters, that target any gaps in the current custodial framework while preserving that framework’s many strengths,” the letter said.
They also said the proposals would excessively expand the custody requirements, impose inappropriate asset segregation obligations, and create unnecessary burden and inefficiency, driving higher costs for custody services.
While the groups have submitted individual comment letters, they added a joint submission “to highlight the diverse range of investors and other end users […] that stand to be harmed if the proposal were adopted in its current form.”