Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets" (File Number S7-34-20; Release No. IA-5406) in response to the request for comments published on regulations.gov. As a concerned citizen, I have identified several areas of concern within the proposed rule that I believe warrant further consideration and analysis. Firstly, I would like to address the inadequate consideration of the unique properties of cryptocurrency. While I acknowledge the SEC's efforts to address safeguarding client assets in the digital age, it is evident that the proposed rule does not fully take into account the decentralized nature and technological complexities of cryptocurrency. The requirement for exclusive control in demonstrating custody, for example, may prove impractical for various cryptocurrencies that operate on distributed ledger technology, such as Bitcoin. Moreover, the proposed rule raises concerns with regard to privacy and the protection of sensitive financial data. As an individual, I value the privacy and safety associated with my personal financial information and social security number. The requirement for investment advisers to share this information with multiple third parties, including custodians and accountants, exposes individuals to increased risk of data breaches and unauthorized access. It is crucial that the SEC carefully considers the potential privacy implications and explores alternative measures to enhance investor protection without compromising personal data security. Additionally, I am concerned about the impact of the proposed rule on small entities and the potential burden placed on investment advisers, especially those who operate as small businesses. While the SEC has acknowledged that most small advisers registered with state authorities will not be significantly affected, it is essential to ensure that the proposed compliance requirements do not disproportionately weigh on small entities. Further analysis and clarification may be necessary to determine the true economic impact on small businesses and explore potential solutions to minimize any unintended adverse effects. Lastly, I would like to raise the issue of the economic analysis presented in the proposed rule. While the SEC has made commendable efforts in considering the costs and benefits of the rule amendments, it is challenging to estimate the true economic effects due to varying custodial practices and controls among investment advisers. Furthermore, the absence of a comprehensive explanation of the expected benefits and costs specifically pertaining to privacy and data security raises questions about the completeness of the analysis. It is imperative that the SEC provides a more nuanced and comprehensive assessment of the economic impacts of the proposed rule, including potential overlooked benefits and costs. In conclusion, I urge the Securities and Exchange Commission to carefully consider the concerns raised regarding the inadequate consideration of cryptocurrency properties, the impact on individual privacy and data security, the burden on small entities, and the completeness of the economic analysis. It is essential to strike a balance between enhancing investor protections and ensuring that regulatory requirements are practical and feasible. Thank you for the opportunity to provide my thoughts and feedback on the proposed rule. I trust that the SEC will take these concerns into account and make informed decisions that prioritize investor protection without unduly burdening investment advisers and compromising individual privacy. Sincerely, Concerned Citizen Sent with Proton Mail secure email.