Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to express concerns regarding the proposed rule "Safeguarding Advisory Client Assets." I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, but there are issues that require further consideration before a final rule is passed in order to adequately safeguard investors, institutions, and public interests. One major concern is insufficient cybersecurity requirements for custodians of digital assets. The digital landscape requires strong cybersecurity protocols in place to protect against theft and fraud, and the proposed rule does not mandate stringent cybersecurity requirements on custodians. This leaves investors vulnerable to cybersecurity threats. The lack of emphasis on cybersecurity is particularly concerning considering the rise of digital assets in all sectors and the potential for large-scale thefts and security breaches. This is an international concern given the extraordinary hacking capacities already developed by bad actors and rogue nation-states. Furthermore, the proposed regulations introduce potential risks related to identity theft. By requiring participants in Decentralized Finance (DeFi) to collect user information, sensitive taxpayer data will surely be stored without proper safeguards. If companies that specialize in security and password protection can be breached, and the government itself is unable to protect its systems, the public has no reason to trust a large scale dissemination of some of its most protected financial information by either public sector entities or those operating under their auspices. Protected personal information will become an even more tantalizing target for identity theft, all under the pretext of more effective tax reporting. It is crucial to strike a balance between regulation and privacy/security concerns to protect investors from potential data breaches and identity theft. As the use of digital assets becomes increasingly prevalent, the safeguarding of these assets should be a top priority. However, the current proposal does not adequately address the unique challenges posed by digital assets. Clear guidelines and requirements for the custody and secure storage of digital assets are of utmost importance and need to be clear and straightforward to ensure investor confidence and protection and trust in regulatory bodies. Moreover, it is vital to strike a balance between regulation aimed at safeguarding investor assets and measures that do not hinder innovation and access to the DeFi space. In conclusion, I urge the SEC to reassess and revise the proposed rule "Safeguarding Advisory Client Assets" to incorporate more stringent cybersecurity requirements for custodians, address privacy and security concerns associated with the custody of digital assets, and ensure transparency and accountability in the regulatory framework. By addressing these issues, the SEC can effectively protect investors while fostering innovation and growth in the advisory industry. Thank you for your attention in this important matter. Sincerely, Grant Porteous -- Grant Porteous Grant Porteous Coaching www.grantporteous.com Office: 231.631.1557 donna@grantporteous.com