Oct. 22, 2023
Dear Sir/Madam, I am writing to express my sincere concerns and heartfelt worries regarding the proposed rule on "Safeguarding Advisory Client Assets" by the Securities and Exchange Commission (SEC). While I appreciate the SEC's commitment to enhancing investor protections and addressing gaps in the custody rule, I am genuinely worried about the potential unintended negative consequences that may arise for investment advisers and the industry at large. One area of concern is the treatment of digital assets or cryptocurrencies within the proposed rule. As an emerging and technologically complex sector, it is essential that the SEC takes a well-informed and nuanced approach to regulating these assets. The current regulatory framework fails to fully recognize their decentralized nature and unique characteristics. I implore the SEC to consider a more comprehensive and collaborative approach that ensures investor protection while fostering innovation and the responsible growth of the digital asset industry. My worries are particularly focused on the proposed requirements related to demonstrating exclusive control over digital assets. Given the complexities of blockchain technology, adequately understanding and addressing the challenges of verifying exclusive control is of utmost importance. With the help of industry collaboration and dialogue, practical solutions can be developed that safeguard client assets without imposing unnecessary barriers on investment advisers. Balancing investor protection and technological advancement is crucial to support a thriving and innovative financial landscape. Additionally, I am deeply concerned about the burden that investment advisers may face regarding assets that cannot be maintained with a qualified custodian. While responsible management of these assets is essential, the increased recordkeeping requirements, separation of duties, and regular reviews outlined in the proposed rule may disproportionately impact smaller investment advisers. Such unintended consequences could hinder competition and impede capital formation. I kindly urge the SEC to give careful consideration to these economic consequences and explore alternative approaches that preserve investor protection while also promoting efficiency and accessibility within the advisory industry. The proposed amendments to the surprise examination requirement also evoke worries among investment advisers. Requiring a written agreement with an independent public accountant may lead to increased compliance costs, presenting a significant challenge for smaller firms in particular. Striking the right balance between effective oversight and burdensome requirements is vital to ensure a competitive and thriving industry landscape. Furthermore, I feel it is necessary to highlight the extensive reporting requirements and information demanded in the proposed changes to the Form ADV. While transparency is undoubtedly important, it is crucial for the SEC to assess the practicality and necessity of these requirements. Avoiding undue reporting burdens on investment advisers will contribute to a more streamlined and efficient regulatory environment. In summary, I hold genuine concerns about the potential unintended consequences of the proposed rule. As our financial landscape constantly evolves, it is imperative for the SEC to take into account the ever-changing industry dynamics and tailor regulations accordingly. I wholeheartedly encourage the SEC to engage in open dialogue and cooperation with industry stakeholders to ensure that the proposed rule strikes a delicate balance between investor protection and the encouragement of innovation, competition, and capital formation. Thank you for considering my worries and concerns regarding this proposed rule. I sincerely hope that the SEC will give these matters the utmost attention and prioritize the well-being of all stakeholders involved. With a worried yet optimistic perspective, Leonardo Iannotta -- Sent from my Android phone with GMX Mail. Please excuse my brevity.