WASHINGTON, D.C.—Legal Director and Securities Specialist Stephen Hall issued the following statement on the filing of Better Markets’ Comment Letter to the Securities and Exchange Commission (SEC) in response to the agency’s proposed rule to enhance protections for client assets held or managed by registered investment advisers:
“Investors simply must have confidence that when they entrust their hard-earned money to a registered investment adviser, those assets will be protected from theft, misappropriation, or loss due to the insolvency of the investment adviser. This is especially important in the crypto space, where we have seen extraordinary investor losses due to the mishandling of client funds and a long string of bankruptcies. To that end, the SEC has rightly proposed a rule that will modernize, expand, and clarify its requirements on the safe custody of client assets. The stakes are high, as the proposal is necessary to better protect investors from potentially devastating losses, to promote confidence in the investments advisers who manage some $50 trillion in client assets, and to help ensure that our capital markets remain robust.
“As we explain in our comment letter, the time is right for these important rule revisions for a host of reasons. Updating the rule would address important trends in the capital markets by expanding its scope beyond funds or securities to encompass all types of assets or positions, including crypto assets to the extent they are not already covered. It will also clarify that an investment adviser’s discretionary trading authority over client assets amounts to custody and triggers the obligations under the proposal. The proposal is firmly grounded not just in the law but also in experience, as it would help address threats to investor assets that are evident from many recent examples of misappropriation, theft, hacks, and other fraudulent schemes.”
“We support this proposal and we urge the SEC to finalize it without weakening any of its elements. While some in the investment adviser industry may lodge complaints, including all-too-familiar objections to compliance costs, the fact is that the SEC has amply considered the economic implications of its proposal, in full accordance with the law. In reality, there should be no dispute that these enhancements are necessary and appropriate for the benefit of investors and the markets as a whole.”
Read our full comment letter here.
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
