Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing to provide my thoughts and concerns regarding the proposed rule on "Safeguarding Advisory Client Assets". While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I have reservations about certain aspects of the proposed rule that I would like to address. Firstly, the scope of the rule raises concerns. While it is crucial to protect client assets, I worry that the proposed rule may go beyond the SEC's regulatory authority and encroach on areas that should be regulated by other agencies. For example, the rule mentions the inclusion of digital assets or cryptocurrencies. It is essential to consider the unique characteristics of digital assets and the existing regulatory uncertainties surrounding them. A comprehensive approach involving collaboration with other regulatory bodies would be more appropriate. Moreover, the proposed rule's requirements related to digital assets could lead to unintended consequences. The rapid growth of digital assets and blockchain technology has transformed the financial landscape, offering new opportunities for investors. It is vital not to stifle innovation through excessive regulation. Instead, the SEC should focus on providing clear guidance and addressing specific risks related to digital assets, taking into account their unique nature. Furthermore, the amendments pertaining to the surprise examination requirement may burden investment advisers with additional costs. While I acknowledge the importance of safeguarding client assets, it is necessary to strike a balance between protecting investors and ensuring the operational viability of investment advisers. A rigorous examination process should be in place, but it should also consider the different types of advisers and their specific operational circumstances. In addition to these concerns, I believe the proposed rule should provide more clarity regarding its impact on small entities. It is vital to assess the potential burdens on smaller investment advisers, especially considering their limited resources and capacity. Simplification or clarification of the proposed rule could help mitigate compliance challenges for small advisers and promote participation in the financial market. The economic analysis presented acknowledges the costs and benefits of the proposed rule, yet the wide variation in practices among investment advisers makes estimating the economic effects challenging. While enhancing investor protection is a commendable goal, it is important to carefully assess the potential costs associated with increased compliance requirements. Balancing regulatory requirements and the economic impact on advisory services is crucial for effective regulation. Finally, I would like to commend the SEC for providing an opportunity for public comment on proposed rule changes. As a concerned investor, it is reassuring to have a voice in the regulatory process. I encourage the SEC to actively engage with stakeholders to foster a productive dialogue that considers all perspectives. Transparency and collaboration are essential as we work towards promoting investor protection, market efficiency, and capital formation. In conclusion, while I support the intent behind the proposed rule, I urge the SEC to consider my concerns regarding potential regulatory overreach, digital assets, the burden on small entities, and the economic impact of increased compliance requirements. By carefully examining these issues and seeking input from stakeholders, we can collectively develop a rule that strikes the right balance between safeguarding client assets and facilitating innovation and growth in the financial industry. Thank you for considering my comments, and I trust that you will take into account the diverse perspectives and challenges presented. Sincerely, Ray