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MFA wants SEC to withdraw safeguarding proposal

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The Managed Funds Association (MFA) has written a supplemental comment letter reiterating its view that the US Securities and Exchange Commission (SEC) should withdraw its proposed safeguarding rule.

The letter, in response to the SEC’s narrow reopening of the proposal’s comment period, also expresses disappointment that the SEC failed to conduct a cost-benefit analysis of its aggressive rule-making agenda in aggregate.

The MFA’s letter re-emphasises that the proposed safeguarding rule would harm investors and other market participants, including advisers, qualified custodians, and independent accountants. The MFA also notes that the SEC has failed to demonstrate any market failure from existing safeguarding practices or how applying equity-like safekeeping requirements to all asset classes will solve a market need.

“The SEC failed to demonstrate how extending current custody requirements to all asset classes will safeguard investors or promote market integrity,” says M “

“It is disappointing the SEC refuses to evaluate the aggregate impact of its rule-making agenda and instead opted for a myopic, piecemeal approach to regulation,” said FA President & CEO Bryan Corbett. “Many smaller and emerging managers will be driven out of the market due to the staggering costs and operational challenges of implementing the SEC’s unprecedented pace and agenda. We call on the SEC to pause the finalisation of this rule until it conducts a comprehensive assessment of the overall costs of this and other proposals.”

In the letter, MFA expresses disappointment that the SEC’s reopening only considers the impact of the final Private Fund Adviser Rule’s audit requirement on the modifications to the audit requirement in the proposed safeguarding rule. The letter highlights that this approach of evaluating the incremental cost of one additional rule-making is inadequate. Instead, the letter proposes that the SEC solicit comment on a cost-benefit analysis of its proposed rules in aggregate.

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