Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets." While I understand the SEC's intent to enhance investor protections, address gaps in the custody rule, and mitigate risks associated with the safeguarding of client assets, I have certain concerns regarding the potential overreach of regulatory authority and the privacy implications of the proposed rule. Firstly, it is important to ensure that regulatory authority is exercised within appropriate boundaries. While the SEC has a crucial role in protecting investors, it is essential to avoid encroaching on areas that fall under the jurisdiction of other agencies. This proposed rule seems to extend the SEC's reach beyond its primary domain, potentially leading to duplication of efforts, confusion, and unnecessary regulatory burdens. It would be more effective to collaborate with other agencies to ensure a comprehensive and coordinated approach to safeguarding client assets. Furthermore, the proposed rule raises concerns about the privacy and safety of sensitive financial data and personal information. Granting access to third parties, such as custodians, to my financial information and Social Security number increases the potential risks for identity theft and unauthorized disclosure. While I understand the need for enhanced protection of client assets, it is crucial to strike a balance between safeguarding assets and preserving individual privacy rights. The SEC should consider implementing robust privacy safeguards and stringent data protection measures, ensuring that only authorized parties have access to sensitive client information. In addition to these concerns, I appreciate the SEC's acknowledgement of the challenge in estimating the economic effects of this proposed rule due to the varying practices among investment advisers. It is essential to conduct a thorough analysis of the costs and benefits of the rule, not only at a macro level but also taking into consideration the potential impact on small entities. The compliance costs associated with the proposed rule should not disproportionately burden small advisers, as this could impede small business growth and innovation within the industry. Moreover, I encourage the SEC to provide greater clarity and guidance on the implementation of the proposed rule. By establishing clear expectations and standards, investment advisers can enhance their understanding of the compliance requirements and develop effective systems and processes to safeguard client assets. Transparency in regulatory expectations will also promote fair competition among advisers and contribute to a level playing field within the industry. In conclusion, while I appreciate the SEC's objective to enhance investor protections through the proposed rule "Safeguarding Advisory Client Assets," I remain concerned about the potential overreach of regulatory authority and the privacy implications of granting access to sensitive client information. I believe it is imperative for the SEC to collaborate with other appropriate agencies, strike a balance between safeguarding assets and individual privacy rights, consider the economic impact on small entities, and provide clearer guidance for the implementation of this rule. Thank you for considering my comments. I hope that my concerns and suggestions will be taken into account to further refine and improve the proposed rule. Sincerely, Andy