The Securities and Exchange Commission on Wednesday reopened the comment period on a proposed rule to redesignate and amend the current custody rule on how registered investment advisers handle and maintain client assets.

The comment period had ended on May 8 but will now be open another 60 days from the reopening release’s date of publication in the Federal Register, which generally comes shortly after such SEC announcements. The proposed amendment to what is known as the “custody rule” for adviser-led investing, but would be changed to the “safeguarding rule,” would expand the rule’s application beyond just securities and funds to all assets in a custodian’s custody.

The reopening of the comment period comes after multiple industry associations called on the regulator to extend the chance for comment, with many noting that the rule would unnecessarily widen the umbrella of regulation for many adviser-led asset investments.

Among more than 100 comments in the initial responses, which came from sources such as asset managers, law firms and auditors, many were seeking further clarity or pullback of the amendment. In May, the Investment Adviser Association argued that the amended rule would bring under SEC audit and reporting: digital assets, real estate and physical commodities that could “make those other assets difficult to transact in.” The organization described the rule as “a huge sea change” for custodians, advisers and accountants.

The IAA commended the decision to reopen the comment period on Wednesday, saying the association would “look forward to reviewing the release over the coming weeks, engaging with the SEC on interpretive issues, and helping our members understand and prepare for implementation of the new rules.”

The SEC is seeking to change the rule that sits under the Investment Advisers Act of 1940 and is intended to enhance protections of customer assets managed by registered investment advisers, according to its latest comment. The proposed change was made by the commission on February 15.

“The reopened comment period will allow interested persons additional time to analyze the issues and prepare comments in light of the final rules and amendments … to enhance the regulation of private fund advisers,” it stated.

Private Fund Advisers Rule

In a separate announcement regarding the financial services space, the SEC announced the adoption of new rules and rule amendments enhancing the regulation of private fund advisers, such as private equity and hedge funds, and updating the existing compliance rule that applies to all investment advisers. According to the SEC, the new rules are designed to “protect private fund investors by increasing transparency, competition, and efficiency in the private funds market.”

“Private funds and their advisers play an important role in nearly every sector of the capital markets,” SEC Chair Gary Gensler said in a statement. “By enhancing advisers’ transparency and integrity, we will help promote greater competition and thereby efficiency. Consistent with our mission and Congressional mandate, we advance today’s rules on behalf of all investors—big or small, institutional or retail, sophisticated or not.”

The final SEC rules will require private fund advisers registered with the SEC to provide investors with quarterly statements detailing certain information regarding fund fees, expenses and performance. In addition, the rules will require a private fund adviser to obtain and distribute to investors an annual financial statement audit of each private fund it advises and, in connection with an adviser-led secondary transaction, a fairness opinion or valuation opinion, the regulator wrote.

The rules will also prohibit all private fund advisers from giving preferential treatment to some investors if that special information would have a “material, negative effect on other investors.”

The SEC has given “legacy status” to adviser and investor contracts that already exist, according to the announcement.

In response to the private funds rule, the IAA stated in a letter that it was “pleased to see several important modifications,” but that it still had “significant concerns about the rules.”

The association of investment advisers noted areas into which it would look more deeply, including: considering the legacy rules to ensure current contracts would not be negated; whether the new rule changes or enhances an adviser’s fiduciary duty under prior regulation; the allowance of an adviser to provide a “valuation opinion, in addition to a fairness opinion,” as an option for an adviser-led secondary transaction, which the association said it will review; and continued concerns over the burden on smaller advisers in terms of compliance and reporting.

The new rules will go into effect 60 days after being filed with the Federal Register.