Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets." While I understand the aim to enhance investor protections and address gaps in the custody rule, I believe that certain aspects of the rule may impose an unreasonable burden on small businesses and startups, particularly in the digital asset industry. One area of concern is the scope of the rule, specifically as it relates to digital assets such as cryptocurrencies. The rapid advancement of technology and the growing popularity of digital assets have transformed financial markets and opened up new opportunities for investors. However, the regulatory uncertainties surrounding digital assets have hindered innovation and growth in this industry. Imposing onerous compliance requirements on small businesses and startups in this space may further stifle their ability to flourish and compete in the global market. Furthermore, the rule makes it challenging for investment advisers to demonstrate exclusive control over crypto assets. Given the unique nature of digital assets, proving exclusive control can be complex and burdensome. I would recommend that the SEC provides further guidance and flexibility in demonstrating control over digital assets, taking into consideration the evolving technology and market practices. In addition to digital assets, the proposed rule also introduces changes to the surprise examination requirement for investment advisers. While I agree that surprise examinations are necessary to safeguard client assets, the proposed amendments place an additional burden on small businesses and startups. The cost of employing an independent public accountant for surprise examinations may disproportionately affect these entities, diverting valuable resources that could be better utilized for business growth and development. Furthermore, the proposed changes to the investment adviser recordkeeping rule also impose a significant burden on small businesses and startups. These entities often have more limited resources and implementation capacities compared to larger firms. The increased compliance requirements may hinder their ability to provide quality advisory services, stifling competition and innovation in the industry. Additionally, I am concerned about the economic impact of the proposed rule on startups. Startups play a crucial role in driving economic growth and job creation. However, the increased compliance costs associated with the proposed rule may deter potential investors and impede the ability of startups to attract necessary capital. It is essential to strike a balance between investor protections and facilitating capital formation to support the growth of startups in the financial industry. I appreciate the SEC's efforts to address investor protections and enhance regulatory oversight. However, I urge the Commission to consider the potential burden on small businesses and startups, particularly in the digital asset industry. Flexibility, guidance, and a proportional approach to regulation will not only safeguard investor assets but also foster innovation, competition, and economic growth. Thank you for considering my concerns. I look forward to further dialogue on this proposal and its potential impact on small businesses and startups in the digital asset industry. Yours sincerely, Chris