The AICPA has submitted a comment letter to Treasury's Financial Crimes Enforcement Network (FinCEN) expressing concern over the potential impact of recently proposed regulations on small registered investment advisers (RIAs).

The letter is in response to a FinCEN notice of proposed rulemaking, titled Anti-Money Laundering/Countering the Financing of Terrorism Program and Suspicious Activity Report Filing Requirements for Registered Investment Advisers and Exempt Reporting Advisers (FINCEN-2024-0006 and RIN 1506-AB58), issued in February. The proposed rules would include certain investment advisers in the definition of "financial institution" for purposes of the Bank Secrecy Act. They would require covered investment advisers to report "suspicious activity" to FinCEN and bring those advisers within the standards of FinCEN's anti-money-laundering and countering the financing of terrorism (AML/CFT) programs.

"Any regulatory framework should aim to support the ability of smaller firms to thrive and contribute positively to the financial services landscape," Dan Snyder, CPA/PFS, AICPA director–Personal Financial Planning, said in a news release. "The AICPA's recommendations will help small CPA firms that are also [RIAs], ultimately increasing access to personalized financial services and encouraging innovation and diversity within the industry."

The letter asked FinCEN to reassess the proposed regulations to ensure an appropriate balance between regulatory objectives and practical realities faced by RIAs, particularly related to small firm RIAs. The letter suggested that requiring the regulations for a firm with a staff smaller than 20 would be difficult to "comfortably absorb" and "could cause challenges in maintaining compliance, potentially deterring new entrants and limiting competition in the industry."

The proposed regulations rely on assets under management (AUM) as the sole determinant for regulatory thresholds, according to the AICPA news release. The AICPA suggested that regulatory thresholds be evaluated based on a combination of factors, including the number of employees and average AUM per client.

The AICPA recommendations also cited the introduction of additional regulatory requirements that would impose a significant administrative burden on small RIAs and could be considered a duplication of efforts already performed by the RIA's custodian.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.