Oct. 22, 2023
I am writing to submit a public comment regarding the proposed rule by the Securities and Exchange Commission (SEC) on the safeguarding of advisory client assets. While I appreciate the SEC's efforts to enhance investor protections, I have several concerns and issues with certain aspects of the proposed rule. Firstly, I would like to address the inadequate consideration of the unique properties of cryptocurrency. The SEC's proposal fails to take into account the decentralized nature and technological complexities of cryptocurrency, which presents challenges in implementing impractical regulatory requirements. Cryptocurrency, by its very nature, differs significantly from traditional financial instruments or assets. Imposing the same custody requirements on crypto assets as on traditional assets does not appropriately address the inherent differences and complexity of safeguarding such assets. The SEC should consider alternative means of regulation that acknowledge and address the unique features of cryptocurrency. Another significant concern is the issue of privacy and the safety associated with allowing so many third parties to have access to highly sensitive financial data and personal information, including social security numbers. While the proposed rule aims to enhance investor protections, it is essential to strike a balance between safeguarding client assets and protecting their privacy. Requiring extensive disclosure of personal information to multiple custodians increases the risk of identity theft and other privacy breaches. The SEC should explore mechanisms that minimize the exposure of sensitive personal information while still ensuring the necessary safeguards are in place. Furthermore, I would like to emphasize the need for greater flexibility in the proposed rule. The SEC's rule should not only account for the diverse needs of different investment advisers but also the evolving landscape of the advisory industry. One size does not fit all, and overly prescriptive requirements can stifle innovation and hinder competition. The SEC should consider incorporating provisions that allow for reasonable alternatives, providing investment advisers with the flexibility to adopt safeguards that are appropriate for their specific circumstances. Additionally, while the economic analysis conducted by the SEC is commendable, it is crucial to consider the potential unintended consequences and costs associated with the proposed rule. The compliance costs for investment advisers, particularly small entities, may be burdensome and hinder their ability to provide effective advisory services. It is essential to strike a balance between investor protection and the potential impact on the efficiency and competitiveness of the advisory industry. The SEC should carefully evaluate the potential costs and benefits for all market participants before finalizing the rule. In conclusion, I urge the Securities and Exchange Commission to reevaluate and address the concerns I have raised in this public comment. It is crucial to consider the unique properties of cryptocurrency, balance the need for safeguarding client assets with privacy concerns, provide for greater flexibility, and carefully assess the economic impact of the proposed rule. By doing so, the SEC can enhance investor protections while ensuring that regulation remains practical, effective, and supportive of innovation in the advisory industry. Thank you for considering my comments. Should you require further clarification or additional information, please do not hesitate to contact me. Sincerely, Ano Tisam