Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets." While I appreciate the aim of enhancing investor protections and addressing gaps in the custody rule, I have some concerns regarding the potential negative impact on investor access to digital assets as well as the burdensome effect on small businesses. Firstly, I am worried that the proposed rules may restrict investor access to digital assets, limiting their ability to participate in this emerging asset class. As digital assets become increasingly popular, it is crucial to strike a balance between safeguarding client assets and ensuring investors have the necessary access and opportunities. The regulations regarding the application of the rule to crypto assets need to be carefully considered to avoid hindering innovation and impeding the growth of this sector. In addition, I am concerned about the impact on small businesses. The reporting requirements outlined in the proposed rule will compel small businesses and startups that would not otherwise be required to track personal identifiable information to implement such tracking. This will undoubtedly cause financial burden and unnecessary administrative complexities for these entities. The additional costs imposed by the rules could put these projects at a significant disadvantage and potentially stifle innovation in the industry. Moreover, the proposed rule may disproportionately affect small businesses that lack the resources and infrastructure to cope with the heightened regulatory obligations. It is essential to consider the potential unintended consequences of these requirements and their impact on small businesses, as they form a critical part of our economy and play a vital role in fostering innovation and competition. Furthermore, I urge the Securities and Exchange Commission to carefully analyze the balance between enhancing investor protections and managing the compliance costs for qualified custodians. While it is essential to ensure the safeguarding of client assets, the increased compliance costs may discourage some qualified custodians from offering their services, ultimately limiting competition in the market. Close attention needs to be paid to strike an appropriate balance between investor protection and market efficiency. In conclusion, while I acknowledge the importance of enhancing investor protections, I am concerned about the potential negative impact on investor access to digital assets and the burdensome effect on small businesses. The regulations need to be carefully crafted to offer adequate protections while avoiding unnecessary barriers to market participation. Additionally, it is crucial to consider the potential unintended consequences and the impact on small businesses, as they are a vital component of our economy. Thank you for considering my comments in the rulemaking process. Sincerely, Joshua Davidson