Oct. 29, 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 intention behind this rule is to enhance investor protections and address gaps in the custody rule, I believe there are potential negative impacts that need to be carefully considered. One area of concern is the potential negative impact on tokenized supply chain solutions. As the world increasingly embraces digital transformation, tokenized supply chain solutions offer immense benefits in terms of transparency, efficiency, and risk mitigation. However, the proposed rules may hinder the adoption of these solutions by imposing stricter custody requirements on digital assets. This could limit the ability of market participants to fully leverage the advantages of tokenized supply chain solutions and impede innovation in this area. It is essential to strike a balance between enhancing investor protections and facilitating the adoption of emerging technologies. Additionally, the proposed rule's treatment of digital assets and cryptocurrencies requires further consideration. Digital assets, such as cryptocurrencies, have emerged as a transformative force in the financial industry, offering new opportunities for investment and commerce. However, regulatory uncertainties surrounding these assets pose challenges for both market participants and regulators. While it is vital to protect investors, overly burdensome and unclear regulations could stifle innovation and hinder the growth of this promising sector. It is crucial to provide clear and adaptable regulations that foster innovation while ensuring investor protection. Moreover, I believe it is vital to carefully consider the economic impact of the proposed rule. The revised rule aims to enhance client and investor protections, and while this is commendable, it is important to evaluate the balance between the benefits and costs. The compliance costs borne by investment advisers, especially smaller entities, need to be carefully assessed to prevent unintended consequences such as limiting access to advisory services or restricting market competition. Additionally, it is crucial to consider potential impacts on efficiency and capital formation, as excessive regulatory requirements can create barriers to entry and hinder market liquidity. In considering the economic analysis, I encourage the Securities and Exchange Commission to explore reasonable alternatives to the proposed rule. By actively seeking input from market participants and stakeholders, the SEC can ensure that the final rule strikes an appropriate balance between investor protections and operational realities. Moreover, the Commission should pay careful attention to potential overlooked benefits and costs, eliminating any unintended consequences that may arise from the rule's implementation. Additionally, I have some questions regarding the proposed rule. How will these regulations impact investment advisers' ability to offer advisory services to clients interested in digital assets? Will the increased compliance costs associated with this rule disproportionately affect smaller investment advisers? How does the proposed rule factor in the rapidly evolving landscape of digital assets and their associated technologies? In conclusion, while I recognize the importance of enhancing investor protections, I urge the Securities and Exchange Commission to consider the potential negative impacts on tokenized supply chain solutions and the need for clear and adaptable regulations surrounding digital assets. I also encourage the SEC to carefully evaluate the economic impact of the proposed rule, seek reasonable alternatives, and consider the potential effects on small investment advisers. By engaging in a thorough analysis and embracing stakeholder input, the SEC can ensure that investor protections are enhanced while avoiding unintended consequences. Thank you for considering my concerns and questions. Sincerely, Mateusz Nowak