Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule titled "Safeguarding Advisory Client Assets." While I appreciate the Securities and Exchange Commission's (SEC) efforts to enhance investor protections and address gaps in the custody rule, I have concerns regarding certain aspects of the proposed rule. Firstly, I am troubled by the scope of the rule and how some terms have been poorly defined. The proposed regulations introduce terms such as "platform," "software," and "ledger," which are susceptible to various interpretations. Furthermore, the definitions of terms like "wallet" and "validator" do not accurately reflect their technical meaning. These vague and ambiguous definitions will undoubtedly lead to confusion and inconsistency in the application of the rule, potentially creating unnecessary compliance burdens for investment advisers. Another concern I have is the potential overreach of regulatory authority by the SEC. It is crucial to ensure that each regulatory agency does not exceed its jurisdiction and encroach on areas that should be regulated by other competent agencies. As the SEC proposes to regulate areas related to crypto assets and custody, it is important to determine if this falls within its purview or if it should be overseen by other regulatory bodies, such as the Commodity Futures Trading Commission or the Financial Stability Oversight Council. Moreover, it is imperative to strike a balance between investor protections and the efficient functioning of the financial services industry. While the amendments aim to safeguard client assets and protect investors, it is essential to assess the potential economic effects and consider the compliance costs imposed on investment advisers. These costs may vary based on existing custodial practices and controls, which should be carefully considered to prevent undue burdens. Additionally, I would like to raise concerns regarding regulatory creep. While it is crucial to update regulations to address evolving risks and challenges, there is a risk of excessive regulation that may stifle innovation and hinder capital formation. It is important that the proposed rule does not unduly impede investment advisers' ability to provide necessary services and guidance to clients, particularly in a rapidly changing technological landscape. In conclusion, I urge the SEC to address the concerns raised regarding the scope of the rule, poorly defined terms, potential regulatory overreach, and the potential impact on industry innovation resulting from regulatory creep. These issues have the potential to undermine the goals of investor protection and efficient capital formation. Thank you for considering my comments. Sincerely, Anonymous Sent from Yahoo Mail for iPhone