Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on Safeguarding Advisory Client Assets. While I acknowledge the aim to enhance investor protections and address gaps in the custody rule, I believe that there are several issues that need to be addressed to ensure the fair and effective regulation of investment advisers. Firstly, I am disappointed by the insufficient consideration of blockchain scalability solutions in the proposed rule. The growing prominence of digital assets and blockchain technology necessitates a regulatory framework that addresses scalability concerns. By not adequately considering these solutions, the SEC risks hindering the adoption and scalability of digital assets, limiting innovation, and impeding the progress of the financial industry as a whole. Furthermore, there are significant privacy concerns associated with the proposed rule. The requirement for investment advisers to share sensitive financial data and social security numbers with multiple third parties raises privacy and safety concerns for clients. This increased exposure to potential data breaches and identity theft should be addressed and mitigated to protect the interests of investors. In addition to these specific concerns, I believe that there are broader issues that need to be addressed in the proposed rule. The economic analysis provided by the SEC, while appreciated, lacks a comprehensive assessment of the costs and benefits for both investment advisers and investors. It is crucial to ensure that the proposed rule strikes a balance between investor protections and the burden it places on advisers, particularly smaller entities. Furthermore, the proposed amendments to Rule 204-2 and the changes to Form ADV result in significant compliance costs and administrative burdens for investment advisers. It is important to consider the impact these requirements may have on the efficiency, competition, and capital formation within the industry. I urge the SEC to carefully assess these costs and consider reasonable alternatives that achieve the desired investor protections without unduly burdening investment advisers. Overall, I strongly believe that the proposed rule needs to be revised to address the concerns I have raised. The lack of consideration for blockchain scalability solutions, privacy concerns, and the need for a more balanced economic analysis are imperative aspects for any successful regulatory framework in today's rapidly evolving financial landscape. I appreciate the opportunity to provide my feedback on this proposed rule and I encourage the SEC to engage in further deliberation and consideration of these concerns. It is crucial that any regulatory measures adopted by the SEC prioritize investor protection while also fostering innovation and efficiency within the investment adviser industry. Thank you for your attention to these important matters. Sincerely, Marc