Oct. 31, 2023
Securities and Exchange Commission 100 F Street NE Washington, DC 20549 Subject: Public Comment on the "Safeguarding Advisory Client Assets" Proposal Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on the safeguarding of advisory client assets. While I appreciate the SEC's efforts to enhance investor protections, I believe there are certain aspects of the proposal that require further consideration and revision. Firstly, I would like to bring attention to the potential overreach of regulatory authority vested in the SEC. It is important to ensure that each regulatory agency operates within its respective sphere of competence. The proposed rule, as it stands, risks going beyond the SEC's jurisdiction, potentially encroaching on areas that should be regulated by other competent agencies. It is crucial that the SEC carefully defines the scope of its authority to safeguard client assets without impeding the proper functioning of other regulatory bodies. One specific area of concern in this proposal is the treatment of digital assets, such as cryptocurrencies, which have emerged as an innovative and transformative element of the financial ecosystem. Regulating these assets presents unique challenges, given their decentralized nature and rapid technological advancements. As the rule outlines provisions for the custody and safeguarding of client assets, it must take into account the regulatory uncertainties surrounding digital assets. Flexibility and adaptability in regulating digital assets are essential to stimulate innovation and protect investors without stifling the potential benefits that digital assets have to offer. Furthermore, it is important to consider the potential impact of the proposed rule on the economy. While the rule aims to enhance investor protections and SEC oversight, it is crucial to strike a balance between safeguarding client assets and facilitating economic growth. Excessive or burdensome regulations can inhibit capital formation, impede competition, and reduce the efficiency of investments. To ensure a healthy and vibrant financial ecosystem, the SEC should carefully evaluate the economy-wide implications of the proposed rule. In regard to the paperwork reduction act analysis, it is worth mentioning that the estimated burden and costs associated with compliance should be carefully examined. Regulated entities, particularly small advisers, may face disproportionate compliance costs, which could create barriers to entry and hinder the growth of smaller market participants. It is important for the SEC to consider alternative approaches or provide additional guidance to alleviate these potential burdens and minimize unintended consequences, especially for small advisers who do not pose the same risks as larger entities. Additionally, while the proposed rule aims to address gaps in the custody rule and enhance investor protections, it is important to assess the practicality and feasibility of implementing these new requirements. Investment advisers may face operational challenges when it comes to segregating client assets, especially in cases where certain assets cannot be maintained with a qualified custodian. It is essential to strike a balance between safeguarding client assets and ensuring that these new requirements do not unduly burden investment advisers or restrict their ability to provide quality services to their clients. In conclusion, I urge the Securities and Exchange Commission to carefully consider the concerns expressed regarding the proposed rule on the safeguarding of client assets. It is essential to strike a balance between enhancing investor protections, regulatory jurisdiction, and promoting economic growth. I appreciate the SEC's commitment to public input and the opportunity to provide feedback on this critical matter. Thank you for considering my comments. Should you require any additional information or have any questions, please do not hesitate to reach out to me. Sincerely, Fred B. Primore Sent with Proton Mail secure email.