WASHINGTON, D.C. — Managed Funds Association (MFA) reiterated that the Securities and Exchange Commission (SEC) should withdraw its proposed safeguarding rule in a supplemental comment letter. 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 rulemaking agenda in aggregate.
MFA’s letter reemphasizes that the proposed safeguarding rule would harm investors and other market participants, including advisers, qualified custodians, and independent accountants. Further, MFA 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 MFA President & CEO Bryan Corbett. “It is disappointing the SEC refuses to evaluate the aggregate impact of its rulemaking agenda and instead opted for a myopic, piecemeal approach to regulation. 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. This will harm competition and decrease investment choice for pensions, foundations, and endowments. We call on the SEC to pause the finalization 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 rulemaking is inadequate. Instead, the letter proposes that the SEC solicit comment on a cost-benefit analysis of its proposed rules in aggregate.
MFA’s full letter is available here.
About the Global Alternative Asset Management Industry
The global alternative asset management industry, including hedge funds, credit funds, and crossover funds, has assets under management of $5.5 trillion (Q3 2023). The industry serves thousands of public and private pension funds, charitable endowments, foundations, sovereign governments, and other global institutional investors by providing portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets.
About Managed Funds Association
Managed Funds Association (MFA), based in Washington, DC, New York, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 170 member firms, including traditional hedge funds, credit funds, and crossover funds, that collectively manage nearly $3 trillion across a diverse group of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors to diversify their investments, manage risk, and generate attractive returns over time.