Oct. 11, 2023
To Whom It May Concern, I am writing to express my concerns about the Securities and Exchange Commission's (SEC) proposal to redesignate and amend the current custody rule under the Investment Advisers Act of 1940. While the intent to enhance investor protections is commendable, there are several issues that warrant careful consideration. Regulatory Overreach The proposed amendments could be seen as an example of government overreach into the financial sector. The additional regulations may create an undue burden on investment advisers, stifling innovation and free enterprise. It is crucial to strike a balance between investor protection and the freedom for financial markets to operate efficiently. Potential Impact on Crypto Assets The proposal does not specifically address the treatment of cryptocurrencies and other digital assets. Given the growing importance of these assets, it is imperative to clarify how the proposed rule would apply to investment advisers who manage portfolios containing cryptocurrencies. Stricter regulations could discourage advisers from including such assets, limiting consumer choice and stifling innovation in this burgeoning sector. Audit Requirements The proposal's requirement for an annual financial statement audit for each private fund could be particularly challenging for funds that include cryptocurrencies. Auditing digital assets presents unique challenges, and the cost and complexity of such audits could deter investment advisers from offering crypto-related services. Investor Autonomy Investors should have the freedom to choose how their assets are managed, including the level of risk they are willing to accept. The proposed rule could be seen as paternalistic, potentially limiting the options available to investors. Regulatory measures should empower investors to make informed decisions rather than restrict their choices. Cost of Compliance New regulations often come with compliance costs, which are typically passed on to consumers. The proposed rule could make financial advice more expensive for the average investor, thereby reducing access to investment opportunities. It is essential to consider the cost-benefit analysis of any new regulation to ensure that it does not inadvertently harm those it aims to protect. In conclusion, while the goal of safeguarding advisory client assets is important, the proposed amendments raise several concerns that could have unintended negative consequences. I urge the Commission to carefully consider these issues as it moves forward with the rulemaking process. Thank you for your attention to these matters. I look forward to the Commission's thoughtful consideration of these concerns.