Oct. 29, 2023
Dear Sir/Madam, I am writing to express my concerns regarding the "Safeguarding Advisory Client Assets" proposal by the Securities and Exchange Commission (SEC). Although I appreciate the SEC's efforts to enhance investor protection and address gaps in the custody rule, I believe that certain aspects of the proposal may have unintended negative consequences. One area of concern is the scope of the rule, specifically in relation to digital assets or cryptocurrencies. These innovative financial instruments, built on blockchain technology, have the potential to transform the finance industry. However, the regulatory uncertainties surrounding digital assets present challenges for both investors and investment advisers. The proposed rule, while seeking to provide clarity, may unintentionally hinder the growth and development of peer-to-peer exchanges, limiting user autonomy and financial sovereignty. Additionally, the proposed rule places significant emphasis on demonstrating exclusive control over client assets, particularly with regards to digital assets. While I understand the importance of safeguarding client assets, the requirement to demonstrate exclusive control may contradict the principles of decentralization and privacy that underpin many digital asset platforms. Striking the right balance between investor protection and preserving the unique characteristics of digital assets is crucial. Moreover, the SEC's proposed amendments to the surprise examination requirement may impose substantial compliance costs on investment advisers. While ensuring the safeguarding of client assets is vital, it is crucial to consider the potential burden placed on advisers, especially smaller entities. The proposed rule should allow for flexibility, enabling advisers to meet the requirements without hindering their ability to effectively serve their clients. Furthermore, the economic analysis accompanying the proposal acknowledges the complexity of estimating the economic effects due to variations in practices among investment advisers. Therefore, it is essential for the SEC to carefully consider the potential impact on efficiency, competition, and capital formation. The proposed rule should not inadvertently impede innovation or create unnecessary barriers for qualified custodians and investment advisers. In conclusion, while I support the SEC's goal of enhancing investor protection in the advisory industry, I urge the Commission to consider the potential negative impact on peer-to-peer exchanges and the unique challenges presented by digital assets. Flexibility, privacy, and maintaining a balance between investor protection and innovation are key factors to consider in crafting effective regulations. I appreciate the opportunity to provide these comments and hope they will be taken into consideration during the rulemaking process. Thank you for your attention to this matter. Kind regards, Helgorian McAfee