Oct. 23, 2023
Dear Sir/Madam, I am writing to provide my public comment on the proposed "Safeguarding Advisory Client Assets" rule by the Securities and Exchange Commission (SEC). I have carefully reviewed the proposal and have identified several areas of concern that I believe warrant attention and consideration. One of my primary concerns relates to the potential overreach of regulatory authority by the SEC. While I understand the SEC's aim to enhance investor protections and address gaps in the custody rule, it is important to ensure that specific areas, such as digital assets or cryptocurrencies, are regulated appropriately and by the appropriate agencies. The digital assets industry, specifically those built on blockchain technology, is rapidly evolving and is transforming the landscape of finance. However, it is also faced with regulatory uncertainties that can hinder its growth and development. In this regard, I express concern over the potential chilling effect that the proposed regulations could have on innovation within the digital asset industry. It is crucial for regulatory bodies to strike the right balance between ensuring tax compliance and fostering growth and development in this emerging sector. I urge the SEC to carefully consider alternative approaches that adequately address investor protections while encouraging innovation and economic growth. This can be achieved through ongoing collaboration with industry stakeholders and the exploration of effective regulatory frameworks that maintain the necessary checks and balances. Furthermore, I applaud the SEC for including amendments related to digital assets in the proposed rule. However, I encourage the Commission to incorporate more nuanced considerations and provisions specific to digital assets. It is important to acknowledge the unique characteristics of this asset class and design regulations that reflect its dynamic nature. This can be achieved by engaging industry experts and conducting thorough assessments of the risks and benefits associated with digital assets. In addition to the concern over the potential overreach of regulatory authority and its impact on digital assets, I would like to emphasize the importance of complying with the Paperwork Reduction Act (PRA) and minimizing the burden placed on investment advisers. The proposed rule and amendments include new information collection requirements, resulting in estimated burdens for advisers. It is crucial for the SEC to carefully assess the necessity, accuracy, and quality of the information being collected, and work towards streamlining the compliance process to reduce unnecessary costs and administrative burdens. Moreover, while I understand the need for enhanced recordkeeping and reporting requirements, it is critical to ensure that these provisions do not disproportionately impact small entities. While most small firms registered with state authorities may not be significantly affected, there are still a considerable number of SEC-registered advisers, particularly those with custody of client assets, who would be subject to the proposed rule. The SEC should consider the costs associated with compliance for small entities and evaluate whether any further simplification or clarification is necessary to facilitate their compliance without jeopardizing investor protections. In conclusion, I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule through the proposed rule. However, I urge the Commission to exercise caution when extending its regulatory authority, particularly in the realm of digital assets, and to consider alternative approaches that foster innovation while protecting investors. Lastly, I encourage the SEC to diligently adhere to the requirements of the Paperwork Reduction Act to minimize the burden on investment advisers and assess the impact on small entities. Thank you for considering my concerns. Sincerely, Theresa Cliff-Ryan