The SEC proposed Rule 223‑1 under the Investment Advisers Act of 1940 (Safeguarding Rule) to amend and replace the existing Custody Rule under Rule 206(4)‑2 (Custody Rule). The Proposal is the latest in a long – and seemingly endless – string of proposed rules and amendments issued by the SEC that either directly or indirectly impact the private funds industry. Reforms to the Custody Rule have been in the pipeline for some time and seem to be welcomed by the private funds industry in principle, but there are also concerns that aspects of the Proposal are impractical and that the SEC’s focus on cryptocurrency assets is distorting the rule. Commentators have also raised doubts about the Proposal’s potential impact on custodians, managers’ ability to negotiate written agreements with custodians and how managers of separately managed accounts will be affected. This second article in a two-part series describes the response of SEC commissioners and the private funds industry to the Proposal, including concerns about its purpose, overbreadth and unintended consequences. The first article summarized the scope and key terms of the Safeguarding Rule and identified the changes most likely to impact closed-end managers. For more on SEC rulemaking, see “SEC’s Fall 2022 Reg Flex Agendas Offer No Relief From Relentless Rulemaking” (Feb. 23, 2023); and “SEC Investment Management Attorneys Offer a Roadmap to SEC Rulemaking and Public Comments” (Nov. 17, 2022).