Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets" (File Number S7-07-20). While I acknowledge the importance of safeguarding client assets and enhancing investor protections, I would like to highlight certain issues and inadequacies in the proposed rule, specifically regarding the treatment of cryptocurrency and privacy concerns. Firstly, the proposed rule fails to adequately consider the unique properties of cryptocurrency. Cryptocurrency operates on a decentralized network and presents technological complexities that require a nuanced approach to regulation. However, the SEC's current proposal does not adequately address these complexities, leading to potentially impractical and burdensome regulatory requirements. Cryptocurrency transactions rely on blockchain technology, which provides inherent security measures. Additional regulatory requirements could hinder the benefits offered by this technology, impacting the efficiency and accessibility of cryptocurrency investments. Therefore, it is vital for the SEC to engage with industry experts and stakeholders to develop a comprehensive understanding of cryptocurrency before imposing regulatory measures that may inhibit its growth and potential benefits. Furthermore, I have significant concerns regarding the privacy implications associated with the proposed rule. Under the current proposal, investment advisers would be required to provide sensitive financial data, including social security numbers, to third-party custodians. While I understand the importance of safeguarding client assets, the potential risk to individual privacy is significant. Once personal private information is stored, it immediately becomes a target for hackers. It's actually safer for people if thier information is not collected at all. This requirement raises concerns about the security of personal information and the potential for identity theft. It is crucial for the SEC to evaluate the privacy safeguards in place for custodians and assess the risks associated with sharing such information. Balancing the need for investor protection with the protection of individual privacy is essential in this digital age, and the proposed rule appears to neglect this aspect. I urge the SEC to explore alternative solutions that maintain the confidentiality of sensitive information while still ensuring the proper safeguarding of client assets. This could include rigorous due diligence and selection processes for custodians, data encryption protocols, and stringent oversight by regulatory authorities. In conclusion, the proposed rule "Safeguarding Advisory Client Assets" has certain inadequacies that must be addressed. The SEC must consider the unique properties of cryptocurrency and work towards crafting tailored regulatory requirements that strike a balance between investor protection and technological advancements. Additionally, an assessment of privacy safeguards is necessary to ensure the protection of sensitive client information. Thank you for considering my concerns on this matter. I believe that through robust engagement and collaboration with industry stakeholders, the SEC can develop effective regulatory measures that achieve their intent while considering the unique challenges posed by cryptocurrency and protecting individuals' privacy. I look forward to the SEC's thoughtful analysis of these issues and any subsequent modifications to the proposed rule. Sincerely, Scot Vanderpool