Oct. 28, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets." While I agree that enhancing investor protections and addressing gaps in the custody rule are important goals, I believe that the SEC may be exceeding its regulatory authority and encroaching on areas that should be regulated by other agencies. One area of concern is the scope of the rule, particularly in relation to digital assets or cryptocurrency. It is undeniable that digital assets, such as cryptocurrency, are transforming the finance industry and becoming increasingly prevalent in investment portfolios. However, regulatory uncertainties surrounding these assets create significant challenges for investment advisers. I urge the SEC to carefully consider the unique characteristics of digital assets and ensure that the proposed rule does not stifle innovation or hinder the growth of this important sector. Furthermore, I am concerned about the implications of the proposed rule on the burden of compliance for small entities. While the SEC states that most small advisers registered with state authorities will not be affected, there are still a significant number of SEC-registered advisers, particularly those who have custody of client assets, that will be subject to the rule. It is essential that the SEC takes into account the potential impact on these small advisers and mitigates any disproportionate burden that may arise from the proposed requirements. In addition to my concerns regarding digital assets and the burden on small entities, I believe it is important to ensure that the SEC's rule does not create unnecessary redundancy or overlap with rules and regulations established by other agencies. The rapidly evolving landscape of digital assets necessitates a comprehensive regulatory framework that avoids duplicative efforts and ensures clarity for market participants. Collaboration among different regulatory bodies is crucial to achieving this goal. Furthermore, as the SEC considers the economic analysis underlying the proposed rule, it is important to accurately assess the costs and benefits associated with the rule amendments. The SEC's qualitative and quantified assessments should aim to provide a thorough understanding of the economic effects and ensure that the rule strikes an appropriate balance between investor protections and compliance costs. The SEC should welcome comments on reasonable alternatives that may address any potential unintended consequences and identify potential overlooked benefits and costs. Finally, I would like to express my support for the SEC's intention to provide a transition period for advisers to comply with the new rule. It is crucial to allow market participants sufficient time to adapt to the changes and implement the necessary measures to safeguard client assets effectively. The compliance dates should be flexible based on assets under management, ensuring that both large and small advisers have a manageable timeline for implementation. In conclusion, while I appreciate the SEC's efforts to enhance investor protections through the proposed rule, it is important to consider potential overreach of regulatory authority, particularly in relation to digital assets. The SEC should collaborate with other agencies to establish a comprehensive regulatory framework and avoid duplicative efforts. Additionally, the economic analysis should accurately assess the costs and benefits of the proposed rule, and a reasonable transition period should be provided for compliance. These considerations will help ensure that the final rule achieves its intended objectives without stifling innovation or placing undue burden on market participants. Thank you for considering my concerns. Sincerely, Mohammadkia Zamiri-Jafarian