Oct. 28, 2023
Dear Sir/Madam, I am writing to provide my public comment on the "Safeguarding Advisory Client Assets" proposal, as put forth by the Securities and Exchange Commission (SEC). As a concerned U.S. citizen, I have reviewed the proposal and identified several areas of concern that I believe need to be addressed in order for the rule amendments to effectively protect investor assets without sacrificing privacy and security. I am somewhat troubled by the apparent lack of consideration given to privacy and security concerns associated with the custody of digital assets. In an age that is increasingly reliant on digital systems and the internet, one would hope that more attention would be given to safeguarding sensitive taxpayer information and protecting against identity theft. However, it appears that the proposed regulations fail to adequately address these concerns, potentially placing investors' assets at unnecessary risk. It is concerning to note that the proposal would force many participants in the decentralized finance (DeFi) space to collect user information, potentially creating honey pots for identity thieves under the guise of tax reporting. With cyberattacks becoming more sophisticated and centralized storage systems proving to be vulnerable, I would expect the SEC to be more proactive in addressing the privacy and security challenges that arise from collecting and storing sensitive individual information. To exacerbate matters, current cybersecurity measures employed by financial institutions are not infallible, as we have witnessed numerous data breaches in recent years. These breaches expose the flaws in the proposed rule's ability to adequately protect investor assets from unauthorized access or misuse. Given the rapidly evolving landscape of cybersecurity, it is crucial that the SEC enhances its efforts to establish more robust protocols capable of adapting to emerging threats. Furthermore, the proposal's lack of guidance on how digital assets will be stored securely raises concerns regarding the potential for unauthorized access and misappropriation of funds. Cryptocurrencies are known for their vulnerability to hacking, and it is imperative that the SEC develops comprehensive guidelines for securing digital assets to ensure the protection of investor funds. In addition to these privacy and security concerns, it is important to address the potentially burdensome nature of the proposed rule amendments on industry participants, particularly small businesses and advisors. The costs associated with implementing the required compliance measures, such as collecting and storing customer information, may disproportionately affect smaller entities, hindering their ability to compete in the market. The SEC must carefully consider the impact on small businesses and explore alternatives to mitigate the compliance burden without compromising investor protection. Considering the issues I have highlighted, I respectfully urge the SEC to: Conduct a comprehensive assessment of the privacy and security risks associated with storing customer information and search for alternative approaches that minimize the risk of identity theft. Evaluate the effectiveness of existing cybersecurity measures employed by financial institutions and prioritize the establishment of more robust protocols for safeguarding client information. Provide detailed guidance on the secure storage of digital assets, including best practices and recommendations to protect against unauthorized access and misuse. Conduct an analysis of the potential burden imposed on small entities by the proposed rule amendments and explore options to mitigate the compliance costs for such entities. I appreciate the opportunity to express my concerns and contribute to the ongoing discussion on this important matter. It is crucial that the SEC adopts a balanced approach that effectively safeguards investor assets without compromising privacy and security. I strongly urge the SEC to address the issues raised in this comment and give due consideration to the impact on industry participants, particularly with regards to identity theft risks and the challenges posed by the custody of digital assets. Thank you for considering my comments. I sincerely hope that with thoughtful consideration and collaboration, a robust and effective safeguarding rule can be implemented to protect the interests of investors while adequately addressing the concerns I have raised. Sincerely, A Concerned U.S. Citizen