Oct. 28, 2023
Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Subject: Public Comment on "Safeguarding Advisory Client Assets" Proposal 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. First and foremost, I am troubled by the lack of consideration for privacy and security concerns associated with the custody of digital assets. In an increasingly digital era, it is imperative that measures be taken to safeguard sensitive taxpayer information and protect against identity theft. However, the proposed regulations fail to adequately address these concerns, placing investors' assets at unnecessary risk. Specifically, the proposal would force many participants in the decentralized finance (DeFi) space to collect user information, thereby creating potential honey pots for identity theft under the guise of tax reporting. Given the rise in sophisticated cyberattacks and the inherent vulnerabilities of centralized storage systems, it is critical that these privacy and security concerns be thoroughly addressed before implementing such requirements. Moreover, current cybersecurity measures employed by financial institutions often fall short in preventing data breaches and safeguarding client information. This raises serious doubts about the efficacy of the proposed rule in adequately protecting investor assets from unauthorized access and misuse. The SEC should take into account the rapidly evolving landscape of cybersecurity and work towards establishing robust protocols that are able to adapt to emerging threats. Furthermore, the proposal's failure to provide detailed guidance on how digital assets will be stored securely raises concerns about the potential for unauthorized access and misappropriation of funds. Given the complex nature of cryptocurrencies and their vulnerability to hacking, it is crucial that the SEC develop 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 potential burden imposed on industry participants, particularly small businesses and advisors, by the proposed rule amendments. The cost of implementing compliance measures, such as collecting and storing customer information, may be disproportionately high for small entities, potentially hindering their ability to compete in the market. The SEC must carefully consider the impact on small businesses and explore avenues for minimizing the compliance burden without compromising investor protection. In light of the issues raised, I urge the SEC to: Conduct a comprehensive assessment of the privacy and security risks associated with storing customer information and consider alternative approaches that minimize the risk of identity theft. Evaluate the effectiveness of existing cybersecurity measures employed by financial institutions and establish 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 for mitigating the compliance costs for such entities. I appreciate the opportunity to voice my concerns and provide input on this important matter. It is crucial that the SEC adopt 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 consider 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 remain hopeful that, with thoughtful consideration and collaboration, a robust and effective safeguarding rule can be implemented to protect the interests of investors while addressing the concerns I have raised. Sincerely, A Concerned U.S. Citizen