Oct. 25, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets." While I acknowledge the intent to enhance investor protections and address gaps in the custody rule, I believe that the rule, as currently proposed, fails to adequately consider the unique properties of cryptocurrency, imposes excessive reporting requirements on small businesses, and provides an incomplete cost-benefit analysis. Firstly, I would like to raise the issue of inadequate consideration of the unique properties of cryptocurrency. The proposed rule does not adequately take into account the decentralized nature and technological complexities of cryptocurrency. It fails to acknowledge that traditional custodial practices may not be directly applicable to cryptocurrency holdings. Imposing impractical and burdensome regulatory requirements on cryptocurrency, without properly considering its distinct characteristics, may hinder innovation in this rapidly evolving space. Additionally, I am concerned about the impact the reporting requirements outlined in the proposed rule will have on small businesses. These requirements will mandate small businesses and startups, who may not otherwise be required to track personally identifiable information, to implement costly tracking systems. This not only places an unnecessary burden on small businesses but also creates a potential disadvantage for these projects in the competitive landscape. By imposing additional costs, the proposed rule could potentially stifle innovation and limit the growth of emerging businesses in the advisory industry. Furthermore, I find the cost-benefit analysis provided by the agency to be incomplete and unconvincing. While the proposed rule aims to enhance investor protections by reducing the risk of asset loss, the agency's analysis may have overstated the benefits and underestimated the costs. The magnitude of compliance costs will ultimately depend on the current custodial practices and controls already in place, and it is essential to ensure an accurate assessment of these costs to avoid potential undue burdens on investment advisers. In conclusion, I urge the Securities and Exchange Commission to carefully reconsider the proposed rule "Safeguarding Advisory Client Assets" in light of the concerns raised. The SEC must take into account the unique properties of cryptocurrency, avoid imposing excessive reporting requirements on small businesses, and provide a complete and accurate cost-benefit analysis. It is crucial to strike a balance between enhancing investor protections and fostering innovation and growth within the advisory industry. Thank you for considering my comments. I hope that the SEC will address these issues and work towards an effective and balanced regulatory framework. Sincerely, Mark