Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets." While I understand the need to enhance investor protections and address gaps in the custody rule, I believe that certain aspects of the proposal may have unintended consequences and create challenges for investment advisers. One specific concern that I would like to highlight is the lack of clarity surrounding the definition of digital assets. In an industry where digital assets, such as cryptocurrencies, continue to evolve and play a significant role, it is crucial to have clear and precise guidelines. However, the current proposal does not sufficiently address this issue, which may result in confusion and difficulties for investment advisers trying to comply with the rule. Furthermore, there is a need to carefully assess the potential legal challenges that may arise from the proposed rule. As the digital asset industry operates within a complex legal landscape, any regulatory measures must align with existing laws, regulations, and constitutional provisions. Failure to do so could result in legal disputes, creating uncertainties and hindering the development of innovative solutions in the market. Another concern is the potential economic impact of the proposed rule. While investor protection is undoubtedly important, it is crucial to strike the right balance and consider the adverse effects that the rule may have on businesses, investors, and the overall economy. A thorough and data-driven analysis should be conducted to assess the potential increase in costs, reduced market efficiency, or limitations on market liquidity that may arise as a result of the proposed rule. Practical implementation issues should also be given thorough consideration. Ambiguous language, unclear requirements, or overly complex compliance measures can hinder the effective implementation of the proposed rule. It is essential to adopt practical and straightforward approaches to compliance, ensuring that investment advisers can navigate the rule without unnecessary burden or operational challenges. In addition, it is imperative to evaluate and mitigate any unintended consequences that the proposed rule may create. While the aim is to enhance investor protection, unintended negative side effects could include stifling innovation, reducing market transparency, or introducing new risks for investors. Careful assessment and consideration of these potential consequences will help ensure that the proposed rule achieves its objectives without creating unintended harms. In light of these concerns, I urge the Securities and Exchange Commission to consider alternatives to the proposed rule. Through the exploration of alternative solutions, we can address the same core issues while minimizing any adverse effects on stakeholders. This approach will enable the development of a more tailored and balanced regulatory framework, one that offers optimal investor protection without impeding market innovation. Furthermore, it is crucial to prioritize the public interest in the development of the proposed rule. Any regulation that limits access to financial services, increases costs for consumers, or imposes unnecessary burdens on market participants ultimately harms the public interest. Therefore, it is vital that the SEC conducts a thorough assessment of the impact of the proposed rule on the public and seeks ways to mitigate any negative repercussions. Taking into account the globalized nature of the financial industry, it is important to consider international coordination. If applicable, the potential conflicts with international standards or agreements should be assessed. Aligning the proposed rule with global best practices will promote harmonization, ensure a level playing field, and prevent jurisdictional discrepancies. I would also like to draw attention to the opposition expressed by various stakeholders regarding specific provisions of the proposed rule. Industry associations, advocacy groups, and lawmakers have raised concerns and reservations that should be carefully considered and incorporated into the rulemaking process. A comprehensive and balanced approach is vital to ensure that all perspectives are taken into account. Additionally, it is crucial to avoid unnecessary regulatory overlap. If the proposed rule duplicates existing regulatory efforts or creates redundancies, a streamlined approach should be adopted. An efficient and coherent regulatory framework is essential for providing clear guidance and effective oversight. In closing, I appreciate the Securities and Exchange Commission's dedication to enhancing investor protections through the proposed rule. However, I strongly urge the SEC to address the concerns raised in this letter to ensure the rule is crafted properly, avoids unintended consequences, and allows for market innovation. A collaborative and thoughtful approach is necessary to achieve the right balance between investor protection, market efficiency, and regulatory effectiveness. Thank you for considering my comment. Sincerely,