Oct. 25, 2023
Mr. Gary Buenavidez Office of the General Counsel Securities and Exchange Commission 100 F Street, NE Washington, DC 20549-9060 Dear Mr. Buenavidez, I am writing to provide a public comment on the proposed rule, "Safeguarding Advisory Client Assets," with reference to File No. S7-08-21. I appreciate the Securities and Exchange Commission's (SEC) efforts in enhancing investor protections and addressing the custody rule's gaps. However, I would like to raise certain concerns and issues regarding the proposed rule, particularly its potential negative impact on the competitiveness of US companies and the risk of increased identity theft. Potential Negative Impact on Competitiveness of US Companies: While it is crucial to safeguard client assets and promote investor protection, it is essential to balance these objectives with maintaining the competitiveness of US companies. The proposed rules may unintentionally put US companies at a disadvantage compared to their international counterparts. This could lead to capital flight, reducing the market share of US firms and hindering their ability to compete on a global scale. To ensure a level playing field, it is vital to carefully consider any potential adverse consequences on US companies and evaluate reasonable alternatives that mitigate these risks. Identity Theft Risks: The introduction of stricter requirements under the proposed regulations, particularly related to the collection and storage of user information, may inadvertently increase the risk of identity theft. As these rules force participants in decentralized finance (DeFi) platforms to collect and store sensitive taxpayer information, proper safeguards must be in place to protect against potential breaches. Without robust security measures, the proposed regulations could create prime targets for hackers, resulting in significant instances of identity theft. It is imperative that the SEC carefully considers the potential risks and implements adequate measures to prevent potential abuses of collected and stored data. Moreover, the proposed regulations under the guise of tax reporting may inadvertently create honey pots for identity thieves, putting taxpayers at risk. To mitigate these risks, additional safeguards should be integrated into the proposed rules, such as enhanced data encryption, stringent access controls, and periodic security audits. Furthermore, by fostering collaboration between the SEC, industry stakeholders, and cybersecurity experts, potential vulnerabilities can be identified and remediated promptly. In conclusion, I urge the Securities and Exchange Commission to consider the potential negative impact on the competitiveness of US companies and the increased risk of identity theft. Balancing investor protection requirements while minimizing unintended consequences is crucial for the success and growth of the advisory industry. I appreciate the SEC's comprehensive approach to addressing these concerns and encourage the agency to work collaboratively with industry stakeholders to implement safeguards that protect both investor interests and the competitive advantage of US companies. Thank you for considering my comment. I also welcome the opportunity to discuss further any aspects of the proposed rule or provide additional input as needed. Sincerely, Asi Hassan