Oct. 22, 2023
Date: [10-22-2023] Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Subject: Safeguarding Advisory Client Assets - Proposed Rule Amendments To Whom It May Concern, I, Khaled Barake, am writing to express my concerns and objections regarding the proposed rule amendments on the safeguarding of advisory client assets (Release No. IA-3514; File No. S7-03-20). While I acknowledge the importance of enhancing investor protections and addressing gaps in the custody rule, I believe that certain aspects of the proposed rule may exceed the Securities and Exchange Commission's (SEC) regulatory authority and should be regulated by other agencies. Furthermore, the proposed rule's treatment of digital assets or cryptocurrencies fails to fully consider the transformative nature of these assets and the associated regulatory uncertainties. Firstly, I am concerned about the scope of the rule and its potential overreach of regulatory authority. It appears that the SEC's proposed rule expands into areas that should rightfully be regulated by other agencies. For instance, the inclusion of discretionary authority in custody and the definition of assets may encroach upon the jurisdiction of other regulatory bodies, potentially leading to regulatory overlap and unintended regulatory consequences. Moreover, the proposed rule's approach to digital assets or cryptocurrencies requires further deliberation. The transformative potential of these assets, underpinned by blockchain technology, has the capacity to revolutionize finance and provide unprecedented opportunities for investors. However, I believe that the SEC's proposed rule fails to adequately consider the unique characteristics of digital assets and the regulatory uncertainties surrounding them. It is crucial that any regulation in this space strikes a balance between investor protection and innovation, fostering an environment that promotes digital asset growth while safeguarding against fraudulent activities. In assessing the proposed rule's economic analysis, I must emphasize the need for nuanced consideration of its impact on efficiency, competition, and capital formation. While investor protection is paramount, it is essential to mitigate any potential unintended consequences that excessive regulatory burdens may impose on advisory services, competition, and the cost structure for qualified custodians. Striking an appropriate balance is crucial for encouraging the efficient allocation of capital and fostering competition in the marketplace. Furthermore, I appreciate the SEC's acknowledgement of the economic effects of the proposed rule, particularly in the context of compliance costs for investment advisers. However, it is imperative to avoid a one-size-fits-all approach and consider the diverse practices and controls currently employed by investment advisers. Any imposed compliance costs should be proportionate and tailored to the risk and scale of advisory operations. I encourage the SEC to engage more deeply with stakeholders to ensure that the proposed rule's costs are justified and do not unduly burden the industry. Finally, I believe that the proposed rule would benefit from a more comprehensive discussion on potential reasonable alternatives. While the SEC has already identified certain alternatives, I urge the commission to actively seek additional input on viable alternatives that may better strike a balance between investor protection, innovation, and efficient regulation. This collaborative approach will ensure that the rule is effective in enhancing investor protection without stifling industry growth and competition. In conclusion, I appreciate the SEC's efforts to enhance investor protections through the proposed rule amendments on safeguarding advisory client assets. However, I have serious concerns about the potential overreach of regulatory authority and the treatment of digital assets or cryptocurrencies under the proposed rule. I strongly urge the commission to carefully consider these concerns and refine the rule accordingly to strike the necessary balance between investor protection, innovation, and regulatory efficiency. Thank you for considering my comments. I look forward to continued engagement on this important matter and trust that the SEC will exercise its regulatory authority judiciously and effectively. Sincerely, Khaled Barake [REDACTED] Sent from my Cellphone