Profound Concerns Regarding the Proposed Rule - Safeguarding Advisory Client Assets, Release No. IA-6240 (Feb. 15, 2023) I am writing to express my concerns and objections regarding the proposed rule titled “Safeguarding Advisory Client Assets” by the U.S. Securities and Exchange Commission (the Commission). My apprehensions stem from various analyses and perspectives, all of which highlight potential negative impacts and overarching issues that the proposal could instigate across multiple sectors of the U.S. financial markets: 1. The proposal may have the unintended consequence of regulating entities that are under the purview of the Commodity Futures Trading Commission (CFTC), which could lead to destabilization of the U.S. derivatives and commodities markets, and put the nation’s farmers and producers at risk. The lack of apparent collaboration with CFTC, which is the primary regulator of the U.S. derivatives markets, is particularly concerning, given the critical role these markets play in the U.S. economy, as well as their importance in managing risks and discovering prices. 2. The proposal may have the unintended consequence of interfering with futures commission merchants, commodity trading advisors, commodity pool operators, and swap dealers in facilitating access to derivatives markets, despite these entities already adhering to robust customer protection rules imposed by the CFTC. It could also hinder advisory clients’ ability to enter into swaps contracts, which would contradict a decade of decision-making and coordination by domestic and foreign market and banking regulators. 3. The proposal’s requirement of an impractical and unworkable verification process for each commodity transaction could lead to systemic harm to the U.S. economy by adversely impacting commodity markets, including those for agricultural, energy, and digital commodities. The verification process could cause significant disruptions in the markets, which could lead to a decrease in the volume of transactions and a subsequent increase in prices. This could have a ripple effect on the economy, potentially leading to inflation and other economic issues. The proposal’s impact on the U.S. economy could be significant, and it is important that policymakers consider these potential consequences before implementing the proposal. 4. The proposal, as it stands, appears to be in conflict with the objective of ensuring high levels of investor protection. This is because it could potentially lead to various negative impacts on investors, including limiting their access to various services, assets, and markets that have well-established rules and procedures. The proposal also makes fundamental changes to the current custody framework without a clear policy rationale, which could adversely affect a diverse range of investors and end users. 5. The proposal raises economic and jurisdictional concerns. It deviates significantly from traditional custody practices, which could lead to a dramatic increase in the cost of offering custodial services. The proposal also utilizes the SEC’s authority to regulate registered investment advisors (RIAs) as a means to regulate entities outside of its jurisdiction. The lack of a comprehensive economic analysis and the statement that the SEC “is unable to quantify certain economic effects because it lacks the information necessary to provide estimates or ranges of costs” indicates a potentially reckless approach to rulemaking. 6. The proposal has the potential to fundamentally reshape traditional custody practices for market participants, despite the fact that custodians have a long history of innovating and modernizing their practices. The asset-neutral approach and other requirements could undermine banks’ most basic functions, such as holding cash, and have particularly harmful impacts on the digital asset ecosystem. Given the gravity of these concerns and the potential for widespread impact across various sectors, I urge the Commission to withdraw the proposal. I believe that the CFTC’s regulatory framework fosters resilient markets that agriculture stakeholders - and American businesses more broadly - rely on, and any proposal that impacts liquidity and customer protections in those markets is unacceptable. 7. In addition, I strongly advise that any future proposed rulemaking should be grounded on an updated economic analysis that takes into account all relevant costs. The analysis should be narrowly tailored to specific instances where the current custody framework has demonstrably failed to protect investors from loss or misappropriation of traditional assets. The proposed rulemaking should be developed in close consultation with the primary regulators of the impacted entities, markets, and products.