Oct. 29, 2023
Dear Sir or Madam, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets", which aims to enhance investor protections and address gaps in the custody rule. While I appreciate the efforts to strengthen safeguards for client assets, I have some concerns that I would like to address regarding the potential negative impact on open finance and the proposed regulations' effects abroad. Potential Negative Impact on Open Finance: One key area of concern is the potential negative impact that the proposed rules may have on the development and adoption of open finance platforms. Open finance systems provide broader access to financial services and enhance transparency in financial transactions. However, the regulations, as currently proposed, may create undue burdens on these platforms and limit the benefits of decentralized financial systems for investors and consumers. Open finance platforms often operate using decentralized protocols and smart contracts, enabling individuals to securely interact and manage their financial affairs. The proposed reporting requirements for these protocols, especially when they operate outside the United States or serve users outside the country, may hinder their growth and innovation. It is essential to strike a balance between investor protection and fostering an environment conducive to open finance platforms' development. I urge the Securities and Exchange Commission (SEC) to consider a more nuanced approach that accommodates the unique characteristics of open finance protocols and the potential benefits they provide to investors and consumers. Impact Abroad: Another concern lies in the insufficient limits on reporting requirements for protocols operated abroad and users located outside the United States. As global financial markets continue to integrate, it is imperative for the SEC to consider the broader implications of these rules and their potential impact on international market participants. The proposed regulations, without appropriate limitations, may impose unnecessary reporting and compliance burdens on foreign platforms and users, thereby discouraging international innovation and investment in the United States. This could hinder cross-border collaboration and have adverse consequences on both domestic and global financial systems. It is essential that the SEC accounts for the global nature of financial markets and engages in a broader dialogue with international regulatory bodies to ensure coordinated efforts that do not impede innovation and investment across borders. In conclusion, while the proposed rule "Safeguarding Advisory Client Assets" aims to enhance investor protections, it is crucial to consider its potential effects on open finance platforms and its implications abroad. Overly burdensome reporting requirements and inadequate considerations for international participants may hinder innovation, limit opportunities, and diminish the benefits of decentralized financial systems. I request the SEC to take into account the concerns raised and explore alternative approaches that strike a balance between investor protection and fostering innovation and global collaboration. Thank you for considering my comments. I trust that the SEC will carefully assess the potential impact of the proposed rule and collaborate with stakeholders to ensure investor protection while promoting a thriving and inclusive financial ecosystem. Sincerely,