Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing to submit a public comment regarding the proposed rule "Safeguarding Advisory Client Assets." While I recognize the SEC's objective to enhance investor protections and address gaps in the custody rule, I have concerns regarding the excessive complexity of the proposed rule. The level of intricacy and ambiguity within the rule raises questions about its practical implementation and the potential for unintentional noncompliance. A fundamental principle of effective regulation is clarity, ensuring that individuals subject to the regulation can readily understand their obligations. However, upon reviewing the proposed rule, it became apparent that it is densely worded and convoluted, making it difficult for investment advisers to decipher its requirements accurately. This complexity could lead to unintentional noncompliance due to misunderstandings or misinterpretations of the rule's provisions. Furthermore, the rule's complexity may also pose challenges for regulators tasked with ensuring compliance. Ambiguous language and intricate instructions may create confusion during compliance evaluations, potentially resulting in inconsistent application and divergent interpretations. In light of the above concerns, I strongly urge the SEC to reconsider the complexity of the proposed rule and strive for greater clarity in its final version. Simplification and clearer language would facilitate better understanding and adherence without compromising investor protection. In making my comment, I draw attention to the SEC's responsibility to consider existing laws and regulations. The substance of the proposed rule should not deviate from the underlying intent of the Investment Advisers Act and other relevant legislation. Instead, the focus should be on clarifying and strengthening safeguards within the confines of existing law rather than introducing unnecessary complexity. By maintaining a clear and concise rule, the SEC can ensure that investment advisers fully comprehend their obligations. Clarity would enable advisers to implement comprehensive compliance measures and minimize the risk of unintentional noncompliance, thereby enhancing investor protection and strengthening the overall integrity of the advisory industry. In conclusion, I strongly recommend a revision of the proposed rule to address the excessive complexity and ensure that its provisions are clear and comprehensible to investment advisers. A simplified and transparent framework will aid in the effective implementation of safeguards without burdening market participants with unnecessary confusion and potential for inadvertent noncompliance. Thank you for considering these comments. I appreciate the opportunity to provide input on this important matter. Sincerely, Brad Federer