Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing to provide my comment on the proposed rule "Safeguarding Advisory Client Assets" (File Number S7-18-20) and express my concerns regarding certain aspects of the rule. As a concerned investor and a proponent of investor protection, I appreciate the SEC's efforts to enhance safeguards for client assets held by investment advisers. However, I believe there are certain areas of the proposal that require further consideration to ensure they do not overly burden investment advisers and potentially hinder the competitiveness of the U.S. market. Firstly, I am concerned about the scope of the rule as it expands coverage to include a broader range of investments held in a client's account. While I acknowledge the importance of protecting investors, it is crucial to strike a balance that does not unduly burden investment advisers. The proposed rule's definition of assets, which now includes discretionary authority in custody, may subject advisers to additional compliance costs without commensurate benefits. Furthermore, I have reservations about how the rule addresses the safeguarding of certain assets that cannot be maintained with a qualified custodian. While enhanced recordkeeping, separation of duties, and regular reviews are necessary, it is important to ensure that these requirements do not result in excessive administrative burdens or hinder advisors from effectively managing their clients' portfolios. Finding a pragmatic approach that promotes investor protection while allowing for flexibility is imperative. Another aspect of concern is the emphasis on the segregation of client assets. While I support the intention of safeguarding client assets, we must ensure that the rule does not inadvertently impede investment advisers' ability to manage client portfolios efficiently. Exceptions are provided, but it is essential to strike a balance that considers the unique circumstances of each advisor-client relationship. Additionally, the proposed requirement for investment advisers to deliver notice to clients when opening an account with a custodian could potentially result in logistical challenges and increased communication costs. While client transparency is vital, it is worth considering alternative methods of communication that would achieve the same objective without adding unnecessary burden. Moreover, the proposed amendments to the surprise examination requirement should be evaluated further to balance safeguarding client assets and minimizing potential excessive costs for investment advisers. Finding an equilibrium that ensures robust protection while preventing unnecessary financial burdens is crucial. Regarding the economic analysis accompanying the proposed rule, I commend the SEC for considering the costs and benefits of the amendments. However, I urge the commission to conduct a thorough analysis of the potential impact these regulations might have on the U.S. market's competitiveness in comparison to global counterparts. It is essential to promote consistency and harmonization of regulatory frameworks across jurisdictions while maintaining strong investor protection. In conclusion, while I commend the SEC's efforts to enhance investor protections through the proposed rule, I believe there are valid concerns that warrant further analysis. Balancing investor safeguards with the need for competition and market efficiency should remain a priority. I appreciate the opportunity to provide my comments and hope they will be taken into account during the rulemaking process. Sincerely, Ronald Harvard Sent with Proton Mail secure email.