US SEC proposes new investment adviser protection rule

03/03/2023 01:57 • Tech Ticker • 123 views

On March 3, Gary Gensler, the chairman of the US SEC, said in an article on the official website of the SEC that he had joined the Investor Advisory Committee. The committee recently submitted a new investment adviser protection rule. According to the provisions of Congress in 2010, this rule extends the custody rule to cover all assets of investors, not just their funds or securities. The proposed rules will also require a written agreement between the consultant and the custodian, increase the requirement for foreign institutions to act as the custodian, and explicitly extend the safeguard rules to discretionary transactions.

The Chairman of the US SEC said that the new rules were being drafted, and the encrypted trading platform might not be a qualified custodian

Interpret the above information:

The US Securities and Exchange Commission (SEC) has proposed a new investment adviser protection rule that aims to extend the custody rule to cover all assets of investors, not just their funds or securities. The new rule was submitted by the Investor Advisory Committee, of which Gary Gensler, the chairman of the SEC, is a member. In an article on the SEC’s official website on March 3, Gensler said that he had joined the committee and supported the new rule.

The custody rule requires investment advisers to hold their clients’ funds and securities with a qualified custodian. Under the proposed new rule, all assets of investors would be covered by the custody rule. This would mean that advisers could not take physical possession of their clients’ assets, but would need to have them held by a qualified custodian.

The proposed rules would also require a written agreement between the consultant and the custodian, which would need to be updated at least annually. This is intended to ensure that the custodian fully understands its responsibilities and obligations. In addition, the requirements for foreign institutions to act as custodians would be increased to provide greater protection to clients.

The safeguard rules would also be extended to discretionary transactions. This means that advisers who have the authority to make investment decisions on their clients’ behalf would be required to follow specific rules and procedures to ensure that their decisions are in the clients’ best interests.

Overall, the proposed new investment adviser protection rule aims to provide greater protection to investors by strengthening the custody rule and extending the safeguard rules. If approved, the rule would significantly impact the way investment advisers operate and would require them to review and update their compliance procedures.

In conclusion, the proposed investment adviser protection rule is a significant step towards protecting investors’ assets and ensuring that investment advisers operate in their clients’ best interests. The SEC is seeking feedback on the proposed rule from the public before making a final decision.

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