• SEC proposed changes to the Investment Advisors Act 1940 by limiting the definition of “qualified custodians” to only banks and savings associations under Federal regulation.
• Congressmen Michael Flood and Ritchie Torres wrote to SEC Chair Gary Gensler, urging him to keep custody rules unchanged.
• Limiting the definition could adversely affect investor protection and market competition, particularly in respect of digital asset custodians.
SEC Proposes Changes to Investment Advisor Act
The U.S. Securities and Exchange Commission (SEC) recently proposed specific changes to the Investment Advisors Act 1940, which would limit the definition of “qualified custodians” – state-chartered banks, state-regulated trust companies, and Federally regulated banks and savings associations – to only include banks and savings associations under Federal regulation.
Congressmen Urge SEC Not To Change Definition
Congressmen Michael Flood and Ritchie Torres wrote a letter to SEC Chair Gary Gensler on May 18th urging him not to change the current definition of a qualified custodian. They argued that assets for a Registered Investment Advisor (RIA) should be subject to banking rules under the existing dual-banking system in the U.S., as this is considered a core banking activity that is already subject to rules from both state and national entities. The Congressmen also noted that changing these definitions could negatively impact investor protection as well as market competition, particularly when it comes to digital asset custodians.
Potential Impact On Investor Protection
Limiting the definition of qualified custodian could have an adverse effect on investor protection as well as market competition, especially when it comes digital asset custodians due their lack of federal regulation or oversight from any one entity at this time. If this proposal were passed into law, it could negatively affect investors who may rely on such services for secure storage solutions for their digital assets or investments in cryptocurrency or other digital securities .
Banking Activity As Core Component Of Custody Rules
Custody activities are considered a key component within banking regulations – both state-regulated entities such as state-chartered banks or trust companies, as well federals ones including federally regulated banks or savings association — making them essential components of any viable investment strategy involving digital assets or cryptocurrency trading pairs . Without access these regulated entities , investors may be left with few options available when it comes secure storage solutions for their investments in cryptocurrency or other digital securities .
The proposal by the US Securities & Exchange Commission has raised concerns among some lawmakers who fear that changing these definitions would have an adverse impact on investor protection , especially when it comes digital asset custodians . Congressmen Michael Flood & Ritchie Torres wrote a letter urging Chair Gary Gensler not alter current regulations , arguing that an overall change in definitions would limit access important financial services needed by investors looking store their investments securely .