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 appreciate the SEC's efforts to enhance investor protections and address gaps in the current custody rule, I have several concerns regarding the potential overreach of regulatory authority in certain areas as well as the treatment of digital assets or cryptocurrencies. Firstly, I am concerned that the SEC's proposed rule may exceed its regulatory authority, encroaching on areas that should be regulated by other agencies. It is important to ensure that each agency operates within its designated jurisdiction to avoid overlapping and conflicting rules. I urge the SEC to carefully consider the scope of its regulatory powers and collaborate with relevant agencies to prevent unnecessary regulatory burden on investment advisers. Regarding the treatment of digital assets or cryptocurrencies, it is crucial to acknowledge the transformative nature of this emerging field. Digital assets, built on blockchain technology, have the potential to revolutionize finance and provide numerous benefits for investors. However, regulatory uncertainties have been a significant challenge for the growth and development of this industry. I urge the SEC to adopt a balanced approach that fosters innovation while ensuring investor protection in the rapidly evolving digital asset landscape. Digital assets introduce unique complexities when it comes to custody and safeguarding client assets. The SEC's proposed rule must adequately address these challenges without stifling innovation. It should provide clear guidelines for investment advisers on how to safeguard digital assets effectively, ensuring that investors' interests are protected while allowing for the growth and evolution of this nascent market. Additionally, the proposed rule amendments require significant compliance costs and burdens for investment advisers. While the goal of enhancing investor protections is commendable, it is essential to carefully consider the economic impact on small entities. The SEC should thoroughly assess the potential costs and burdens associated with compliance, particularly for small advisers, to avoid disproportionately burdening them and potentially hindering their ability to provide valuable services to clients. Furthermore, the proposed rule amendments necessitate various changes to recordkeeping requirements, reporting obligations, and additional disclosures through Form ADV. While transparency and regulatory oversight are crucial, it is essential to strike a balance between collecting necessary information and minimizing administrative burdens. The SEC should carefully evaluate the practicality of these proposed changes, considering the potential impact on adviser resources, competitiveness, and capital formation. In conclusion, the SEC's proposed rule, "Safeguarding Advisory Client Assets," raises important concerns related to the potential overreach of regulatory authority and the treatment of digital assets or cryptocurrencies. I strongly urge the SEC to consider the long-term implications of these proposed rule amendments and ensure that they promote innovation, protect investors, and minimize unnecessary burdens on investment advisers. Thank you for considering my public comment and allowing concerned stakeholders to voice their perspectives on this crucial matter. Sincerely, Jon Sent with Proton Mail secure email.