Oct. 15, 2023
Dear Securities and Exchange Commission (SEC) I am writing to express my concerns and reservations about the Securities and Exchange Commission's (SEC) proposal on Safeguarding Advisory Client Assets, specifically the redesignation and amendment of the current custody rule as outlined in Release No. IA–6240, dated February 15, 2023. While I appreciate the SEC's mission to protect investors and maintain the integrity of the financial markets, it is imperative that we carefully examine the potential ramifications of the proposed changes. In this regard, I would like to raise the following legal and constitutional concerns regarding the SEC's approach: **1. Overbreadth Doctrine:** The proposed regulation's scope extends beyond the SEC's traditional mandate and jurisdiction. By attempting to regulate cryptocurrencies, which have not been clearly classified as securities, the SEC may inadvertently create a regulatory environment that stifles innovation and chills legitimate speech or activity. The overbreadth of this proposal raises concerns about the agency's authority and its potential impact on constitutionally protected rights. **2. Substantive Due Process:** Regulating cryptocurrencies without a clear legal basis and without a comprehensive framework in place could infringe upon substantive due process rights. Economic liberties of individuals and businesses may be unduly interfered with, potentially causing harm to their interests and the overall market. **3. Equal Protection:** If the SEC were to regulate certain cryptocurrencies while excluding others, it might run afoul of the equal protection clause by treating similar entities or individuals differently under the law. Such arbitrary distinctions could lead to legal challenges and undermine the principle of equal protection under the law. **4. Non-Delegation Doctrine:** The proposed expansion of the SEC's regulatory authority into the realm of cryptocurrencies might raise concerns regarding the non-delegation doctrine. This doctrine limits the extent to which Congress can delegate legislative power to executive agencies. Expanding the SEC's jurisdiction into uncharted territory may be subject to legal challenges based on this doctrine. **5. Congressional Intent:** The SEC's attempt to regulate cryptocurrencies beyond the scope of existing federal securities laws could be seen as contravening congressional intent. Congress has the constitutional authority to define the jurisdiction and limits of regulatory agencies. Expanding the SEC's authority in this manner disregards the separation of powers and could set a concerning precedent. **6. Rule of Law:** The proposed regulation may undermine the fundamental principle of the rule of law. Regulating without a clear legal basis creates uncertainty, which can erode public trust in the regulatory process and hinder compliance with the law. **7. Regulatory Overreach:** Regulating cryptocurrencies outside the SEC's traditional jurisdiction is a significant departure from its core responsibilities. Such regulatory overreach has the potential to stifle innovation and economic growth within the cryptocurrency industry. **8. Private Property Rights:** The SEC's proposed actions could infringe on private property rights protected by the Fifth Amendment's Takings Clause. The seizure or regulation of digital assets without a clear legal basis may result in unintended consequences and legal challenges. In conclusion, while the SEC's proposal on Safeguarding Advisory Client Assets aims to protect investors and the financial markets, it raises numerous legal and constitutional concerns. I urge the SEC to carefully consider these concerns and the potential implications of its actions on the broader legal and economic landscape. It is crucial that any regulatory changes in this domain be conducted within the bounds of legal authority, congressional intent, and the principles of due process.