Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets." While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I have several concerns regarding the scope of the rule and the potential overreach of regulatory authority. Firstly, I am concerned that the proposed rule expands the coverage to include a broader range of investments held in a client's account. While I understand the need to safeguard client assets, it is essential to ensure that the SEC does not encroach upon areas that should be regulated by other agencies. For instance, digital assets or cryptocurrencies, which are experiencing significant growth and transforming the finance industry, should be regulated by the proper authorities well-versed in these emerging technologies. The SEC's involvement in the regulation of digital assets may result in regulatory uncertainties and hinder innovation in this space. Moreover, the proposed rule's application to crypto assets is particularly concerning. The SEC should carefully consider the unique characteristics of digital assets and the challenges involved in demonstrating exclusive control. Imposing strict custodial requirements on digital assets may stifle their potential and discourage investment in this innovative sector. Instead, it would be prudent for the SEC to collaborate with relevant experts and industry stakeholders to develop tailored regulations that address the specific risks posed by digital assets, without hampering their growth. Additionally, the proposed rule's amendments on recordkeeping and registration requirements appear burdensome and may result in unnecessary compliance costs for investment advisers. While investor protection is of utmost importance, it is crucial to strike a balance between safeguarding assets and fostering efficiency within the advisory industry. The SEC should further evaluate these requirements to ensure they do not unduly burden investment advisers, especially smaller entities that may lack the resources to comply with extensive recordkeeping obligations. Furthermore, I am concerned about the potential impact of the proposed rule on the economy. While the SEC's intentions to enhance investor protections and oversight are commendable, it is essential to consider the broader economic consequences of these regulations. Excessive regulatory burdens can hinder competition, impede capital formation, and increase costs for qualified custodians and investment advisers. The SEC should conduct a thorough economic analysis to assess the potential impacts and weigh the benefits against the costs to avoid unintended consequences. In conclusion, I believe the SEC's proposed rule on the safeguarding of advisory client assets raises concerns regarding regulatory authority and potential overreach. I urge the SEC to carefully consider the intricacies of emerging technologies such as digital assets and ensure that regulations strike a balance between investor protection and promoting innovation. Additionally, a thorough economic analysis should be conducted to assess the impact on the economy and avoid unnecessary burdens on industry participants. I appreciate the opportunity to provide my input and hope that my concerns will be taken into account during the rulemaking process. Sincerely, Tyler