Subject: S7-04-23: Webform Comments from Caterina
From: Caterina
Affiliation:

Oct. 30, 2023

As we pore over the intricate nuances of the proposed SEC
Release No. IA-6240; File No. S7-04-23, it becomes increasingly
apparent that the regulation raises several legal challenges. First
and foremost, there appears to be a fundamental conflict between this
proposed rule and existing securities laws governing financial
reporting standards. According to Section 13(a) of the Securities
Exchange Act of 1934, publicly traded companies must submit annual
reports containing financial statements within fourteen days following
their fiscal years' conclusion. This provision explicitly states
that these filings should reflect data up until the end of such
periods. In contrast, the suggested amendment requires RICs to supply
audited financial statements ahead of shareholder meetings, even
though such events commonly occur months after calendar year ends. As
a result, the SEC seems to be asking RICs to provide two separate sets
of accounting records, one compliant with federal law and another
tailored specifically for the regulator's demands, creating
unnecessary confusion and duplicating efforts. Secondly, there exists
a reasonable argument that the proposed rule contradicts basic
principles of fairness and procedural due process enshrined in the U.S
Constitution. It effectively imposes retroactive penalties, compelling
entities to rectify historical missteps long after they initially
occurred. Given the far-reaching implications of such a drastic shift,
we believe that this particular aspect would likely face intense
scrutiny from the courts, possibly rendering the entire edict null and
void. Hence, it is crucial that the Commission closely examine the
legality and feasibility of the proposed changes before implementing
them, lest it expose itself to considerable legal jeopardy down the
line.