Oct. 25, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on Safeguarding Advisory Client Assets. While I appreciate the intention behind the rule to enhance investor protections and address gaps in the custody rule, I believe there are several areas of the proposal that require further consideration and refinement. One particular area of concern is the inadequate consideration of the unique properties of cryptocurrency. The SEC's approach to regulating cryptocurrency assets fails to recognize their decentralized nature and technological complexities. By imposing the same regulatory requirements on cryptocurrencies as on traditional assets, the SEC risks stifling innovation and hindering the growth of this important sector. Instead, the SEC should focus on developing a framework that acknowledges the specific challenges and opportunities presented by cryptocurrencies, allowing for practical and effective regulation. Additionally, I am deeply worried about the privacy and safety implications of the proposed rule. The requirement for investment advisers to share sensitive financial data, including social security numbers, with numerous third parties raises significant concerns about privacy and data security. The potential risks associated with widespread access to such confidential information should not be overlooked, and the SEC should explore alternative methods that can achieve the desired level of investor protection without compromising individuals' privacy rights. Furthermore, I would like to draw attention to the potential negative economic impact of the proposed rule. The rule's compliance requirements and the associated costs could place a significant financial burden on investment advisers, ultimately leading to increased costs for businesses and investors alike. This could result in decreased efficiency, reduced market liquidity, and hindered capital formation. It is crucial for the SEC to carefully assess the economic consequences of the proposed rule and consider whether alternative measures could be implemented to achieve the desired objectives in a more cost-effective and business-friendly manner. In light of these concerns, I urge the SEC to engage in a more nuanced and comprehensive analysis of the proposed rule. By taking into account the unique properties of cryptocurrency and addressing the potential privacy and economic impact, the SEC can effectively enhance investor protections while fostering innovation and promoting a vibrant and competitive market. Thank you for considering my input on this matter. I hope that my comments will be taken into account during the rulemaking process. If there are any clarifications or additional information required, please do not hesitate to reach out. Sincerely, Gareth