Oct. 28, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on Safeguarding Advisory Client Assets. While I understand the importance of enhancing investor protections and addressing gaps in the custody rule, there are several issues that need to be considered in order to ensure the effectiveness and fairness of these proposed regulations. One area of concern is the lack of consideration for privacy and security concerns associated with the custody of digital assets. The rapid growth of digital assets, particularly cryptocurrencies, has revolutionized the financial industry. However, the proposal fails to adequately address the unique challenges posed by these assets, potentially putting investors' assets at risk. Digital assets are built on blockchain technology, which provides a decentralized and secure ledger of transactions. However, regulatory uncertainties surrounding digital assets have created challenges for both investors and investment advisers. The proposed rule should take into account the worldwide regulatory standards that are emerging to govern these assets. Harmonizing regulations across jurisdictions will not only protect investors but also foster innovation and ensure a level playing field for market participants. Furthermore, the economic analysis provided in the proposal should consider the potential impact of these regulations on efficiency, competition, and capital formation. While it is important to enhance client and investor protections, there should be a balance struck to prevent excessive compliance costs that could stifle competition and discourage innovation. It is also crucial to consider potential alternatives to the proposed rule. The SEC should actively seek input from industry experts, market participants, and other stakeholders to explore reasonable alternatives that achieve the desired objectives while minimizing the burden on investment advisers. Additionally, the proposal should strive to improve transparency and regulatory oversight. The inclusion of enhanced recordkeeping requirements and reporting obligations in Form ADV will provide regulators with greater visibility into the custody of client assets and increase transparency for investors. However, it is important to ensure that the cost burden associated with these reporting requirements is reasonable and proportionate to the benefits they provide. In conclusion, the proposed rule on Safeguarding Advisory Client Assets is a step in the right direction to enhance investor protections. However, it is essential to address the privacy and security concerns associated with digital assets, consider worldwide regulatory standards, and strike a balance between investor protections and compliance costs. I appreciate the opportunity to provide input on this matter and I trust that the SEC will carefully consider these concerns for the benefit of investors and the industry as a whole. Sincerely, Florian Reinbold