Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on Safeguarding Advisory Client Assets. While I appreciate the Securities and Exchange Commission's commitment to enhancing investor protections, I believe certain aspects of the proposed rule may have a negative impact on investor access, particularly in relation to digital assets. The proposed rule expands the coverage to include a broader range of investments held in a client's account, which is a commendable step in protecting investor interests. However, I am concerned that the rule's application to crypto assets may inadvertently restrict investor access to this emerging asset class. The digital asset market has demonstrated significant growth and potential, and it is vital that investors have the opportunity to participate. Any regulatory measures should be carefully crafted to strike a balance between protecting investors and allowing for innovation and expansion. I urge the Securities and Exchange Commission to consider more nuanced provisions that properly address these concerns. Blanket regulations for crypto assets may not accurately account for the unique features and risks associated with this type of investment. Instead, the SEC should collaborate with industry experts, investors, and relevant stakeholders to create tailored guidelines that promote investor protections while fostering continued access to digital assets. In addition, I would like to highlight the potential challenges in demonstrating exclusive control over crypto assets, as discussed in the proposed rule. The nature of blockchain technology may pose difficulties in meeting the strict requirements for exclusive control under the rule. Imposing rigid custody requirements without considering the inherent characteristics of digital assets could have unintended consequences, leading to increased costs and operational burdens for investment advisers. Flexibility and adaptability are crucial in regulating a rapidly evolving industry, such as cryptocurrencies, to ensure the preservation of investor access while maintaining necessary safeguards. Furthermore, the proposed rule addresses how advisers can safeguard assets that cannot be maintained with a qualified custodian. While I appreciate the need for enhanced recordkeeping, separation of duties, and regular reviews, it is important to strike a balance that does not overly burden advisers and impede competition. Constraints on certain advisers regarding the assets they can handle may restrict investor choices and limit market diversity. It is essential to consider innovative solutions that preserve investor protection without stifling industry growth and investor access. Finally, the proposed changes to Form ADV and the associated costs and burdens on investment advisers should be carefully evaluated. While transparency and regulatory oversight are essential, it is crucial to consider the potential economic effects on investment advisers, especially smaller entities. Striking a reasonable balance between compliance costs and investor protection is crucial to foster a vibrant and competitive advisory industry. In conclusion, I appreciate the Securities and Exchange Commission's commitment to strengthening investor protections through the proposed rule. However, I believe there is a need for a more comprehensive assessment of the potential negative impact on investor access, particularly in relation to digital assets. By taking a more nuanced approach and actively engaging with experts and stakeholders, the SEC can develop regulations that preserve investor protection while facilitating innovation and maintaining a thriving market. Thank you for considering my comments on the proposed regulations. I appreciate the SEC's dedication to ensuring the integrity of the advisory industry, and I trust that my concerns will be taken into account during the rulemaking process.