AICPA Provides Feedback on Proposed Regulations for Registered Investment Advisors
Washington, D.C. (July 9, 2024) –In a letter to the U.S. Securities and Exchange Commission (SEC) last week, the American Institute of CPAs (AICPA) commented on RIN 1506-ab66, Customer Identification Programs for Registered Investment Advisers and Exempt Reporting Advisers as proposed by the Financial Crimes Network (FinCEN). The proposed ruling under FINCEN 2024-10738 specifically addresses concerns regarding the implications of the proposed regulations on Registered Investment Advisers (RIAs).
The AICPA is asking the SEC to address concerns of redundant duties when an RIA holds all their investments with a custodian and the significant administrative burden on small CPA firms that are also small RIAs.
Redundancy
The proposal's reliance on excluding only RIAs with custodians for mutual funds overlooks
practical considerations of RIAs that hold all their clients’ investments as custodians. The
additional independent verification requirements outlined in the proposal would result in
redundant compliance obligations.
Administrative Burden
The introduction of additional regulatory requirements, such as customer identification
programs imposes a significant administrative burden on small RIAs, especially when the addition of this regulation regarding independent verification obligations is a duplication. As such, RIAs whose client investments are held by an account custodian should be exempt from the proposed regulation, avoiding regulatory duplication and placing the compliance burden on the entity providing the client account, rather than a third-party RIA.
“The cumulative impact of regulatory requirements on small RIAs should not be overlooked,” said Pamela Ladd, AICPA’s senior manager of Public Accounting (Personal Financial Planning). “As regulatory burdens continue to mount, smaller firms face heightened challenges in maintaining compliance, thereby potentially deterring new entrants, and limiting competition within the industry.”
About the American Institute of CPAs
The American Institute of CPAs® (AICPA®) is the world’s largest member association representing the CPA profession, with 400,000 members in the United States and worldwide, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. AICPA sets ethical standards for its members and U.S. auditing standards for private companies, not-for-profit organizations, and federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives continuing education to advance the vitality, relevance and quality of the profession.