US Congressmen urge SEC to keep definition of ‘qualified custodian’ unchanged
Rep. Michael Flood and Rep. Richie Torres wrote to SEC Chairman Gary Gensler asking him not to change the custody provision.
In February, the US Securities and Exchange Commission (SEC) proposed specific changes to the Investment Advisers Act of 1940. Currently, the definition of “qualified custodian” includes state chartered banks, state regulated trust companies, federally regulated banks and savings associations. .
Under the proposed changes, the SEC wants to limit the definition to include only federally regulated banks and savings associations.
Senator Flood and Torres I have written Addressed to Chairman Gensler on 18 May, asking him not to change the current definition.
They argued that registered investment adviser (RIA) asset custody was a “core banking activity.” Therefore, such activities must be subject to banking rules and regulations under the existing dual banking system in the United States, in which state and national banks are operated equally.
Lawmakers also pointed out that state regulators have already enacted rules to protect consumers. Uninsured state-owned trust companies are still subject to comprehensive customer protection rules, such as capital and liquidity standards, and “have prudently provided custody services for centuries.”
Therefore, narrowing the definition of eligible custodians would be “counterproductive” by providing investors with more security, lawmakers wrote. They added that given the small number of digital asset managers, restricting the definition is likely to cause market concentration and adversely affect competition.
Finally, in the SEC’s own draft, a narrower definition could deprive investors of assets from innovative and secure custodians, exposing them to a “greater risk of loss.” It was pointed out that it was pointed out that there was
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