Oct. 30, 2023
Dear SEC, I am writing to express my concerns about the proposed rule on safeguarding advisory client assets. I believe that the rule would impose excessive burdens on investment advisers and increase their compliance costs and risks. The rule would require advisers to obtain written agreements from each custodian and accountant that they use, which may be difficult or impossible to obtain in some cases, especially for foreign or unregulated custodians. This will limit the choice and availability of custodial services for advisers and their clients, and potentially expose them to higher fees and lower quality of service. This rule would also require advisers to undergo annual surprise examinations by independent public accountants, which may be costly, time-consuming, and disruptive to their business operations. The examinations may not provide meaningful assurance of the safety and accuracy of client assets, as they may not detect fraud, misappropriation, or misvaluation of assets. Moreover, the examinations may create conflicts of interest between the accountants and the advisers, as the accountants may have incentives to report favorable results to retain their clients. The rule would create a one-size-fits-all approach that may not be suitable for different types of advisers, clients, assets, and custodians. For example, the rule may not adequately address the specific needs and preferences of institutional clients, who may have more sophisticated and customized custody arrangements. The rule may also not account for the diversity and complexity of emerging asset classes such as crypto assets, which pose unique challenges and risks for custody. I urge the SEC to reconsider the rule and adopt a more flexible and risk-based approach that takes into account the diversity and complexity of the advisory industry. I appreciate the opportunity to comment on this issue.