Were the rule adopted as proposed, money managers would have to re-evaluate many custodial agreements. Investment firms would also have to wrestle with additional complexities around whether their arrangements comply with the expanded rule—something that can already be a sensitive judgment call.
“It’s not a simple matter of more paperwork,” Avellaneda said.
As proposed, the rule could have a “hugely detrimental impact” on firms with limited resources, Bernstein said.
Almost 90% of the investment advisers that are registered with the SEC have 50 or fewer employees and one or two offices, according to IAA statistics.
And although crypto’s expansion is helping drive the proposal, there’s no indication of widespread problems with safeguarding traditional funds and securities, the group said.
“We don’t see the problem that requires this kind of hammer approach, as opposed to a scalpel approach,” Bernstein said.
Source: SEC’s ‘Hammer’ Approach to Custody Revamp Worries Money Managers