Feb. 24, 2023
February 24, 2023 Dear SEC Commissioners, As a retail investor, I am writing to express my concern about the proposed Safeguarding Rule that the SEC has recently put forward. While I understand that the intention of the rule is to protect client assets held by investment advisers, I am worried that the proposed provisions may have unintended consequences that could negatively impact retail investors like myself. Firstly, I am concerned about the proposed emphasis on cryptocurrency assets. While I understand that these assets are becoming more popular, the fact is that they are still a relatively new and untested asset class. I agree with the SEC's emphasis on regulating cryptocurrency assets. This proposed rule may lead to increased pressure on qualified custodians to either enhance their own capabilities related to the custody of digital assets or to partner with expert sub-custodians that are able to implement cold storage and other secure solutions. These changes could lead to increased costs for investment advisers, which may ultimately be passed on to investors. Secondly, I am worried about the increased compliance-related changes that the proposed Safeguarding Rule would require. The SEC's position that advisers should obtain a reasonable understanding of the marketplace of custody services available for each client asset for which it has custody, and maintain written documentation containing material facts concerning its understanding of the custodial marketplace, would require significant time and investment. This would likely result in additional costs for investment advisers, which could again be passed on to investors. Additionally, the proposed implementation of only one year from approval for large advisers would not leave much time for these entities to establish compliance frameworks. This is particularly concerning given that certain aspects of the proposed Rule, such as the written agreement obligations between the adviser and qualified custodian, cut against the grain of current industry practice. Finally, I am worried about the enforcement of the proposed provisions. While I agree that safeguards are necessary to protect investors, I am concerned that violations of the proposed provisions is \"Fluff\" and may not be enforced at all. The SEC's position that scienter would not be required may make it easier for the agency to bring enforcement actions against investment advisers. However, this may lead to a situation where investment advisers are unfairly punished for unintentional violations of the proposed provisions. In conclusion, while I agree that safeguards are necessary to protect client assets held by investment advisers, I am concerned about the unintended consequences of the proposed Safeguarding Rule. I urge the SEC to take a careful look at the potential impacts of the rule, and to ensure that any new regulations do not unfairly burden retail investors. Thank you for your attention to this important matter. Sincerely, Jacob Gillmore