Subject: S7-04-23: Webform Comments from Anonymous American
From: Anonymous American
Affiliation: None

Oct. 29, 2023

To whom it may concern,

I am writing to provide my public comment on the proposed rule
"Safeguarding Advisory Client Assets" by the Securities and
Exchange Commission (SEC). While I recognize the importance of
enhancing investor protections and addressing gaps in the custody
rule, I have concerns regarding certain aspects of the proposed rule.

Potential Overreach of Regulatory Authority:

My first concern pertains to the potential overreach of regulatory
authority by the SEC in proposing this rule. It is important to ensure
that regulatory responsibilities are swift and directed to the
appropriate authorities. In the case of cryptocurrency, which is not
an entity regulated by governments but rather controlled by
individuals, the tax implications should ideally be monitored by the
banks themselves and not by the SEC. Imposing additional regulatory
burden on the SEC risks stifling innovation and may have unintended
consequences for the broader crypto ecosystem.

Moreover, the SEC should exercise caution to avoid overlapping
jurisdictions and encroaching on areas that are best regulated by
other agencies. Clear boundaries between regulatory authorities are
crucial to prevent duplicative requirements and reduce compliance
costs for market participants.

Balance between Investor Protection and Industry Practices:

While I acknowledge the importance of safeguarding client assets and
the need to address potential risks associated with custody, it is
equally important to strike a balance that allows investment advisers
to operate efficiently without hampering the growth and
competitiveness of the industry.

The proposed rule's expansion of the coverage to include a
broader range of investments introduces complexities that may result
in unintended burdensome compliance measures for investment advisers.
There needs to be flexibility for investment advisers to adopt
innovative technologies and custody solutions while ensuring that
appropriate safeguards are in place.

Crypto Assets: Unique Challenges and Guidance:

Crypto assets present unique challenges in terms of custody and
compliance. It is essential for the SEC to provide clear guidance to
investment advisers on how to demonstrate exclusive control over these
assets, considering their decentralized nature. Ambiguity in the
treatment of crypto assets may hinder institutional adoption and
prevent potential investors from fully capitalizing on the benefits of
this emerging asset class.

The SEC should collaborate with industry stakeholders and subject
matter experts to cultivate a transparent regulatory environment that
accommodates the unique characteristics of cryptocurrency assets while
effectively safeguarding investor interests.

Effective and Efficient Implementation:

To minimize the compliance burden on investment advisers, the SEC
should consider providing sufficient transition periods and compliance
dates based on the assets under management. A one-year transition
period, as proposed, appears reasonable, but further flexibility
should be considered based on the practicality of implementation and
the time required for investment advisers to adjust their operational
processes.

Additionally, the proposed requirement for surprise examinations
should be assessed for its effectiveness in protecting client assets.
There should be clarity on the scope and frequency of these
examinations to ensure they do not become overly burdensome,
particularly for investment advisers with discretionary authority over
client assets.

Public Consultation and Transparency:

Lastly, I would like to commend the SEC for seeking public comments
and soliciting input on the proposed rule. This promotes transparency
and allows for the consideration of diverse perspectives from market
participants, investors, and other stakeholders. I encourage the SEC
to remain open to reasonable alternatives and to thoroughly evaluate
the impact of the proposed rule from both a quantitative and
qualitative perspective.

In conclusion, I believe it is essential for the SEC to strike the
right balance between investor protection and facilitating sustainable
growth in the industry. As the SEC finalizes the rule, I hope it takes
into consideration the concerns raised in this public comment and
continues to engage with market participants to ensure effective and
efficient implementation.

Thank you for considering my comments. I trust that the SEC will
consider the broader implications of this rule and make well-informed
decisions that ultimately serve the best interests of investors and
the industry.