Oct. 30, 2023
Dear Securities and Exchange Commission, I write to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets." While I appreciate the SEC's intention to enhance investor protections and address gaps in the custody rule, I believe certain aspects of the rule may exceed the Commission's regulatory authority and encroach on areas that should be regulated by other agencies. Moreover, the proposed rule's treatment of digital assets or crypto does not adequately address the unique characteristics of these emerging technologies, potentially stifling innovation in the finance industry. Firstly, I am concerned about the scope of the rule and its potential overreach. The proposed expansion of coverage to include a broader range of investments held in a client's account could inadvertently lead to regulatory duplication or conflicts with the jurisdiction of other agencies. It is important to ensure that appropriate boundaries are set to prevent regulatory overreach and allow for effective coordination between regulatory bodies. When it comes to digital assets or crypto, it is essential to recognize the transformative potential they hold in the finance industry. However, I believe that the current regulatory uncertainties surrounding these assets pose significant challenges. The proposed rule must strike a balance between providing necessary investor protections and allowing for innovation and growth in the digital asset space. A blanket approach to regulating crypto-assets may hinder the development of this nascent industry and discourage entrepreneurial spirit. Furthermore, I am concerned about the burdensome compliance requirements placed on investment advisers with regards to safeguarding digital assets. While it is crucial to address the unique risks associated with these assets, it is equally important to avoid burdensome regulations that may stifle competition and discourage investment in this rapidly evolving area. Flexibility and innovation should be encouraged through comprehensive guidance and regulatory frameworks that balance investor protection with market development. In addition, the proposed amendments appear to place an unduly heavy burden on advisers when it comes to fulfilling recordkeeping and reporting requirements. While it is essential to maintain records related to client notifications, custodian information, and transactions, the SEC should be mindful of the potential costs and administrative burdens placed on investment advisers, particularly smaller firms. Striking the right balance between regulatory oversight and the burdens on industry participants is crucial for promoting capital formation and fostering a thriving investment advisory market. Lastly, I encourage the SEC to consider soliciting input from a wide range of industry stakeholders and experts to ensure that the proposed rule and amendments reflect the evolving landscape of the finance industry. It is imperative to gather feedback and opinions from diverse perspectives to foster a well-rounded and effective regulatory framework. In conclusion, I believe it is essential for the SEC to proceed cautiously in implementing the proposed rule "Safeguarding Advisory Client Assets." The SEC should strive to find the appropriate balance between enhancing investor protections, encouraging innovation in the digital asset space, and minimizing burdensome regulations that may stifle competition and market growth. By engaging with industry stakeholders and considering reasonable alternatives, the SEC can craft a rule that effectively addresses investor concerns while promoting sustainable growth in the finance industry. Thank you for considering my comments on this important rulemaking proposal. Sincerely, Brendan Rivera