Oct. 29, 2023
Attention Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on "Safeguarding Advisory Client Assets." While I acknowledge the aim of enhancing investor protections and addressing gaps in the custody rule, I believe that certain aspects of the proposed rule require further clarification and evaluation, particularly in regards to the custody requirements for digital assets. One notable concern is the lack of clarity on custody requirements for digital assets. As the proposal stands, it fails to provide clear guidelines on how investment advisers should safeguard these assets. This creates uncertainty for market participants and leaves room for potential gaps in protection. Given the growing prevalence and importance of digital assets in today's financial landscape, it is essential that the proposed rule provides specific guidance on how investment advisers can fulfill their custodial responsibilities with regard to these assets. Without clear guidelines, the industry may struggle to adapt and investors may face heightened risks. Furthermore, it is worth considering whether the proposed rule is necessary coming from the government. While enhancing investor protections is indeed important, it is essential to evaluate whether this particular regulation falls within the purview of the Securities and Exchange Commission. There may be other entities or industry-led initiatives that are better suited to address these concerns. Unnecessary government regulation can burden market participants and hinder innovation and growth. It is important to explore alternative avenues for enhancing investor protections before resorting to additional regulations. In considering the proposed rule, it is also crucial to strike a balance between investor protections and compliance costs for investment advisers. While safeguarding client assets is paramount, imposing excessive compliance burdens can have unintended consequences, particularly for smaller advisory firms. In order to maintain a thriving investment advisory industry, it is essential to keep compliance costs at a reasonable level, especially for small entities that may lack the same resources as larger firms. Striking an appropriate balance between regulatory requirements and the economic realities of the industry is crucial for both investor protection and the overall health of the advisory sector. I also want to acknowledge the Economic Analysis presented in the proposal. While the SEC has made efforts to assess the costs and benefits of the rule amendments, there are inherent complexities in estimating the economic effects due to varying practices among investment advisers. I urge the SEC to continue refining this analysis and seek input from industry participants to ensure a comprehensive assessment of the proposed rule's economic impact. In conclusion, while I appreciate the SEC's commitment to enhancing investor protections, I believe that certain aspects of the proposed rule on "Safeguarding Advisory Client Assets" require further clarity and evaluation. Specifically, the custody requirements for digital assets need to be better defined to ensure adequate investor safeguards and reduce market uncertainty. Moreover, we should carefully consider whether the SEC is the most appropriate entity to address these concerns, in order to avoid unnecessary government intervention. Lastly, it is important to find a balance between investor protections and compliance costs for investment advisers to maintain a healthy and competitive advisory industry. Thank you for considering my comment. I appreciate the opportunity to provide input on this important regulatory proposal.