Oct. 29, 2023
I am writing to submit my public comment on the proposed rule titled "Safeguarding Advisory Client Assets" which aims to enhance investor protections and address gaps in the custody rule. I appreciate the opportunity to express my concerns and raise important issues regarding this proposal. II. Discussion Unequal Treatment of Different Types of Digital Assets One pressing concern I have with the Securities and Exchange Commission's (SEC) proposed rules is the unequal treatment of different types of digital assets. The evolving landscape of digital assets requires thoughtful consideration of regulatory measures that ensure investor protection without stifling innovation. However, the proposed rules fail to provide consistent and clear guidance, leading to confusion and potential regulatory arbitrage. It is crucial to establish a level playing field for all digital assets that fall within the purview of the proposed rule. Treating different types of digital assets inconsistently could inadvertently create a fragmented regulatory environment and hinder market development. The SEC should strive for regulatory clarity and provide clear definitions and guidelines that encompass the diverse nature of digital assets. III. Economic Analysis The SEC's economic analysis of the proposed rule is commendable. However, it is important to address the potential implications of cross-border transactions and international markets. Given the global nature of financial markets, it would be impractical and ineffective for the SEC to unilaterally address regulatory concerns related to international transactions. International markets operate under their own regulatory frameworks, and the SEC should recognize and respect the autonomy of other jurisdictions in regulating cross-border transactions. Any attempt to regulate international markets through this proposal would be counterproductive and unnecessary. Instead, the SEC should focus on collaborating and coordinating with international regulatory bodies to address concerns related to cross-border transactions. IV. Request for Comment I appreciate the opportunity to provide feedback on the economic analysis conducted by the SEC and the proposed rule's potential impacts on efficiency, competition, and capital formation. However, I also urge the SEC to consider the following additional areas for public comment and input: 1. Compliance Costs: It is essential to thoroughly evaluate the potential compliance costs associated with the proposed rule, particularly for small and medium-sized investment advisers. Consideration should be given to minimizing any undue burden on these entities while maintaining strong investor protection measures. 2. Regulatory Alternatives: The SEC should actively seek comments on alternative approaches to achieve the objectives of investor protection and asset safeguarding. The input received from market participants and industry experts can help the SEC strike a balance between regulatory effectiveness and the potential burden on the advisory industry. 3. Quantitative Impact Analysis: In addition to the qualitative assessments provided in the economic analysis, conducting a quantitative impact analysis can offer a more comprehensive understanding of the potential costs and benefits associated with the proposed rule. This would enable a more informed decision-making process and ensure that the rule's objectives are achieved efficiently. V. Conclusion In conclusion, I urge the SEC to address the unequal treatment of different types of digital assets within the proposed rule. Furthermore, I emphasize the importance of excluding international markets from the purview of the rule to avoid undue interference in other jurisdictions' regulatory frameworks. I appreciate the SEC's commitment to investor protection and its efforts to enhance the safeguarding of client assets. By considering the concerns raised in this comment and ensuring a transparent and collaborative approach, the SEC can foster a regulatory environment that promotes investor confidence and market integrity while facilitating innovation and efficiency. Thank you for considering my public comment. I trust that the SEC will carefully review all comments received and make informed decisions that strike an appropriate balance between investor protection and regulatory efficiency.