Oct. 28, 2023
Dear Securities and Exchange Commission, As a concerned U.S. citizen, I would like to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets." While the intentions of the rule to enhance investor protections and address gaps in the custody rule are commendable, I have some reservations and concerns regarding the potential negative impacts of the rule, particularly with regards to financial inclusion and the treatment of digital assets. Firstly, I would like to address the impact of the proposed rule on financial inclusion, specifically as it relates to digital assets. The rule expands the coverage to include a broader range of investments held in a client's account. However, given the rapid growth and adoption of digital assets, there is a risk that the rule may limit the ability of underserved populations to access these innovative financial instruments and participate in the broader financial system. Digital assets, such as cryptocurrencies, have emerged as a transformative force in finance, providing new opportunities for investment, cross-border transactions, and financial inclusion. Yet, regulatory uncertainties have already posed challenges for the widespread adoption and integration of these assets into the mainstream financial system. It is crucial that any regulations put forth by the SEC support innovation and competition while also adequately protecting investors. I recognize the SEC's efforts in addressing the application of the rule to crypto assets and acknowledging the challenges in demonstrating exclusive control over these assets. However, it is important to strike a balance between investor protection and stifling innovation. The proposed rule should consider the unique nature of digital assets and provide a regulatory framework that encourages responsible practices while enabling market participants to explore the full potential of these technologies. Another concern I have relates to the paperwork burden and potential compliance costs imposed by the proposed rule and amendments. It is critical to carefully assess the economic effects of these requirements, particularly for small investment advisers. While investor protection is of utmost importance, it is equally crucial to consider the practical implications for market participants, especially smaller entities, as they strive to meet the proposed reporting, compliance, and recordkeeping requirements. Additionally, in order to promote efficiency and competition, the rule should consider the impact on qualified custodians. The proposed changes may inadvertently increase compliance costs for these custodians, which could potentially lead to less competition in the space. It is essential to evaluate the unintended consequences that could arise and ensure that the rule strikes a fair and balanced approach that fosters both investor protection and healthy competition within the industry. Furthermore, regarding the economic analysis put forth by the SEC, it is crucial to consider the varying practices among investment advisers. The analysis should not only be quantitative but also take into account qualitative assessments of the potential economic effects on different market participants. Understanding the potential benefits, costs, and efficiencies involved will allow for a comprehensive evaluation of the proposed rule and its impact on the overall economy. In light of the concerns raised, I believe it is imperative that the SEC takes into consideration the potential negative impacts on financial inclusion, particularly in the context of digital assets. The regulatory framework surrounding these assets should be thoughtful and forward-thinking, allowing for innovation and competition while ensuring proper investor protection. I appreciate the opportunity to provide my input on the proposed rule, and I encourage the SEC to carefully consider the comments and suggestions put forth by concerned citizens and market participants to ensure that the final rule strikes the right balance between regulatory oversight and fostering a dynamic and inclusive financial system. Thank you for your attention to these matters. Sincerely, A Concerned U.S. Citizen