Oct. 30, 2023
Dear Sir or Madam, I am writing to express my thoughts on the proposed rule "Safeguarding Advisory Client Assets" (Release No. IA-XXXX) by the Securities and Exchange Commission (SEC). I appreciate the opportunity to provide feedback on this significant matter regarding the safeguarding of client assets by investment advisers. While it is crucial to enhance investor protections and address gaps in the custody rule, I have some concerns regarding certain aspects of the proposed rule and its potential impact on the digital asset space. First and foremost, I find the proposed rule to be an example of regulatory overreach. It seems that the SEC is exceeding its proper jurisdiction and encroaching on the responsibilities of other agencies. The regulations, as currently crafted, impose reporting obligations on various participants in decentralized finance (DeFi), resulting in confusion and inconsistent reporting for the same transaction. This regulatory overlap has the potential to stifle innovation and impede the growth of the rapidly evolving DeFi sector. In light of this, I would appreciate more clarity on the evaluation and monitoring mechanisms that will be put in place to assess the overall effectiveness of these proposed regulations. It is necessary to establish clear and measurable objectives to gauge the success of the regulations and to make necessary adjustments if they fall short of achieving the intended outcomes. An effective evaluation framework is vital to ensuring that the regulatory efforts are producing the desired results and safeguarding investor assets optimally. Furthermore, I am keen to gain insights into the specific strategies and methodologies the SEC plans to employ in detecting and deterring non-compliance with the proposed regulations. It would be informative to understand how advanced analytics and machine learning algorithms will be utilized to identify patterns of suspicious activity. Harnessing cutting-edge technology in regulatory oversight can serve as a powerful tool in safeguarding client assets and upholding market integrity. In considering the impact of these regulations, I cannot ignore the potential burdens that could be placed on small businesses operating in the digital asset sector. The complexity and nuances of the industry, coupled with regulatory requirements, may present significant challenges for smaller entities. Therefore, I strongly urge the SEC to conduct a thorough analysis of the impact on small businesses and explore targeted relief options to alleviate the regulatory burden while maintaining the overarching goal of investor protection. In conclusion, I acknowledge the SEC's commendable efforts to enhance safeguards for advisory client assets. However, it is essential to strike a balance that ensures investor protection without impeding innovation or creating unnecessary regulatory burdens. I kindly request the SEC to carefully consider these concerns and be attentive to fostering an optimal regulatory framework for the safeguarding of advisory client assets. Thank you for considering my comments. I have full confidence that the SEC will thoughtfully review and address all public feedback to develop a well-balanced and effective final rule. Yours sincerely, Daniel Paul Boismier