Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets". While I commend the aim of enhancing investor protections and addressing gaps in the custody rule, I have several concerns and issues that I would like to voice. Specifically, I would like to address the lack of clarity on compliance requirements for non-custodial services and the potential privacy and safety concerns associated with allowing multiple third parties to have access to sensitive financial data. Firstly, the proposed rule does not provide clear guidance on compliance requirements for non-custodial services. This lack of clarity creates uncertainty for market participants, especially investment advisers who offer such services. It is crucial for the SEC to provide explicit guidelines on how non-custodial services should comply with the proposed rule to ensure consistency and a level playing field for all industry participants. Without clear instructions, there is a risk of inconsistent interpretations and compliance practices, which could undermine the intended investor protections. Furthermore, the proposed rule raises concerns regarding privacy and the safety of sensitive financial data. By requiring investment advisers to disclose client information to custodians, there is a heightened risk of unauthorized access, data breaches, and identity theft. The public disclosure of client information, including social security numbers, poses significant threats to individual privacy and security. It is imperative that adequate safeguards and security measures are put in place to protect the privacy and confidentiality of client data. The SEC should consider incorporating stringent requirements for encryption, data storage, and access controls to mitigate the risks associated with the disclosure of sensitive financial information. In addition to these concerns, I would also like to raise certain broader questions and issues related to the proposal. Firstly, it would be highly beneficial for the SEC to provide further guidance on the potential impact of the proposed rule on small entities. Small investment advisers may face significant compliance costs and operational challenges when implementing the rule. The SEC should consider whether any alternative requirements or exemptions could be provided to mitigate the burden on small entities, without compromising investor protections. Furthermore, as part of the economic analysis, I encourage the SEC to thoroughly examine the potential costs and benefits associated with the proposed rule. While the rule aims to enhance investor protections, it is important to assess the potential economic effects on advisory services, competition, and capital formation. By conducting a robust analysis, the SEC can ensure that the proposed rule strikes an appropriate balance between investor protections and the overall economic wellbeing of the industry. In conclusion, I urge the Securities and Exchange Commission to address the lack of clarity surrounding compliance requirements for non-custodial services and prioritize the privacy and safety of sensitive financial information. Furthermore, I recommend that the SEC thoroughly examines the economic implications of the proposed rule, particularly with regard to small entities, competition, and capital formation. By incorporating these considerations and adequately addressing the raised concerns, the SEC can create a rule that effectively safeguards client assets while minimizing unintended consequences. Thank you for considering my public comment. I appreciate the opportunity to contribute to this important discussion and look forward to the SEC's careful consideration of my concerns and suggestions. Sincerely, Anonymous