Oct. 29, 2023
Dear SEC, 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, I have some concerns regarding certain aspects of the rule. In particular, I believe there is a potential overreach of regulatory authority that needs to be addressed. The SEC's proposed rule expands the coverage and scope of investments held in a client's account. While the intention to safeguard assets is commendable, it is important to consider whether the SEC has the necessary expertise to regulate various types of assets. There may be other agencies, such as the Commodity Futures Trading Commission (CFTC) or the Financial Crimes Enforcement Network (FinCEN), that are better equipped to oversee certain assets or activities. For instance, the proposed rule discusses the application of the rule to crypto assets. Given the complex nature of cryptocurrencies and the rapidly evolving regulatory landscape in this space, it would be prudent for the SEC to collaborate with the CFTC and other relevant agencies to ensure consistent and effective oversight. This would avoid any potential duplication of efforts and ensure that the rules governing crypto assets are comprehensive and well-informed. Furthermore, the proposed rule addresses the challenges of demonstrating exclusive control over crypto assets. While I understand the need to protect client assets, it is important to strike a balance between security and innovation. Overly burdensome requirements may stifle growth and hinder the development of the digital asset industry. Therefore, the SEC should carefully consider the potential impact of the rule on this emerging sector and seek input from industry participants and experts. Additionally, the rule includes requirements for advisers to safeguard assets that cannot be maintained with a qualified custodian. While the goal of protecting client assets is important, it is crucial to ensure that the regulatory measures are not unnecessarily prescriptive. This may hinder investment advisers' ability to tailor their practices to the unique circumstances of their clients. The SEC should consider a more principles-based approach that allows for flexibility while maintaining adequate safeguards. Moreover, the proposed rule places a significant burden on investment advisers regarding recordkeeping and compliance. While I understand the need for transparency and accountability, it is important to balance these requirements with the costs imposed on advisers, particularly smaller ones. The SEC should carefully assess the economic impact of the rule and consider whether the benefits outweigh the compliance costs, especially for small entities. In conclusion, while I support the SEC's objectives of enhancing investor protections, it is important to ensure that the proposed rule does not exceed the SEC's regulatory authority or stifle innovation and growth. Collaborative efforts with other relevant agencies and a considerate approach to the specific challenges of emerging asset classes are necessary to strike the right balance. I urge the SEC to carefully consider the concerns raised in this comment and appropriately address them in the final rule. Thank you for considering my input. Sincerely, Billy Minger