Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on "Safeguarding Advisory Client Assets." While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I believe there are several key issues that need to be addressed. One area of concern is the scope of the rule as it pertains to digital assets or cryptocurrencies. The SEC fails to adequately consider the unique properties of these assets, such as their decentralized nature and technological complexities. As a result, the regulatory requirements outlined in the proposal may be impractical and onerous for investment advisers. It is essential that any regulations in this space are carefully designed to balance the need for investor protection with the need to foster innovation and growth in the digital asset market. Furthermore, the proposed rule's amendments to the custody requirements do not provide clear guidance on how investment advisers can effectively safeguard digital assets. The SEC should work towards developing specific guidelines and best practices for the custody of digital assets, taking into account the various custody models and technological solutions that are emerging in the industry. This would provide greater clarity for investment advisers and facilitate compliance with the rule without stifling innovation. Additionally, I believe that the economic analysis provided in the proposal lacks sufficient detail and quantification of the costs and benefits associated with implementing the rule. While the analysis acknowledges the challenge of estimating economic effects due to varying practices among investment advisers, a more comprehensive assessment is needed to ensure that the benefits of the rule outweigh the potential costs and burdens on advisers and their clients. A thorough analysis would help to identify any unintended consequences of the rule and allow for adjustments to be made before it is implemented. Moreover, the proposed rule places significant compliance burdens on investment advisers, particularly with regard to recordkeeping and reporting requirements. These increased administrative responsibilities may disproportionately impact small advisers, leading to increased costs that could ultimately be passed on to clients. It is crucial that the SEC carefully considers the potential impact on small entities and explores ways to mitigate any adverse effects to ensure a level playing field for all advisers. Lastly, I would like to emphasize the importance of soliciting public input and considering alternative approaches to the proposed rule. The public comment process allows for a diversity of perspectives to be taken into account and raises any potential concerns or oversights that may have arisen during the drafting of the rule. Considering the rapidly evolving nature of the digital asset space, it is essential that the SEC remains open to feedback and actively seeks the input of industry experts and stakeholders. In conclusion, while I applaud the SEC's focus on enhancing investor protections, I believe that the proposed rule on "Safeguarding Advisory Client Assets" requires further refinement, particularly with regards to the treatment of digital assets. By considering the unique properties of cryptocurrency and other digital assets, conducting a more comprehensive economic analysis, and being mindful of the compliance burdens on investment advisers, we can ensure that the final rule strikes the right balance between protecting investors and fostering innovation. Thank you for the opportunity to provide input on this important matter. Sincerely, Roger Sent with Proton Mail secure email.