Subject: S7-04-23: Webform Comments from Anonymous
From: Anonymous
Affiliation:

Oct. 29, 2023

Dear Securities and Exchange Commission,

I am writing to express my concerns regarding the proposed rule
"Safeguarding Advisory Client Assets." While I appreciate
the intention to enhance investor protections and address gaps in the
custody rule, I believe that certain aspects of the rule may have
adverse effects on the competitiveness of US companies and our
position in the global market.

One potential negative impact is that the proposed rules may put US
companies at a competitive disadvantage compared to their
international counterparts. The expanded scope of the rule,
particularly regarding the inclusion of a broader range of investments
held in a client's account, may create additional compliance
burdens for US investment advisers. This could hinder their ability to
compete globally and attract investment capital. In an increasingly
interconnected and competitive marketplace, it is crucial to maintain
a level playing field for domestic firms.

Furthermore, the application of the rule to crypto assets raises
concerns. While it is important to address how investment advisers
safeguard these assets, it is equally important to ensure that
regulatory requirements do not stifle innovation in this emerging
field. Striking the right balance between investor protection and
fostering growth and innovation is imperative in the fast-paced world
of digital assets.

Another concern is the potential impact on the capital formation
process. The proposed rule, with its requirements for enhanced
investor protections and safeguards, may inadvertently increase
compliance costs for qualified custodians. This could discourage
certain custodians from offering their services, reduce competition,
and ultimately limit the availability of custodial options for
investment advisers. Easy and cost-effective access to custodial
services is vital for the smooth functioning of investment markets,
and any restrictions or barriers to entry could impede the efficiency
of capital formation.

It is important to note that the global investment landscape is highly
competitive, with jurisdictions around the world vying for investment
capital. If the proposed rule imposes excessive regulatory burdens on
US investment advisers, it may result in capital flight and a loss of
market share for US companies. It is crucial to consider the potential
unintended consequences of these regulations on our ability to attract
investments and remain globally competitive.

In order to strike a careful balance between investor protection and
promoting competitiveness, I kindly suggest the Securities and
Exchange Commission conduct a thorough analysis of the potential
impact of the proposed rule on the competitiveness of US companies.
This analysis should take into account the potential limitations it
may introduce, and explore alternative approaches that achieve the
desired investor protections without hampering US companies.

Thank you for considering my concerns. I strongly believe that it is
essential to ensure safeguards for advisory client assets, while also
maintaining a competitive environment that fosters economic growth and
innovation. I look forward to the Securities and Exchange
Commission's thoughtful consideration of these matters.