Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets." While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I have several concerns regarding the rule's scope and potential impacts on the industry. Firstly, I believe that the proposed rule inadequately considers self-custody solutions. Self-custody is an emerging practice within the decentralized finance (DeFi) sector that allows individuals to have direct control over their assets. However, the current rules do not provide clear guidance on how self-custody can be effectively implemented and regulated. This lack of consideration stifles innovation and hinders the development of user-controlled asset management solutions. Furthermore, I am concerned about the confusing reporting requirements outlined in the proposed regulations. The rules create reporting obligations for various participants in the DeFi space, resulting in multiple inconsistent reports for the same transaction. This not only increases the administrative burden for market participants but also raises practical challenges in ensuring accurate and coherent reporting. Simplifying and harmonizing the reporting requirements could alleviate these concerns and promote efficiency in the industry. Moreover, I would like to express my unease regarding the potential overreach of authority in the proposed regulations. While I acknowledge the need for investor protections, it is important to consider the balance between regulation and stifling innovation. Excessive and burdensome regulations could deter investment advisers and other market participants from exploring new opportunities and technologies. It is crucial that the SEC carefully assesses the potential unintended consequences and trade-offs of its proposed rules to ensure they do not hinder innovation and market growth. In addition to the aforementioned concerns, I urge the SEC to carefully review the economic analysis and consider the impact on small entities. The estimated compliance costs and administrative burden may disproportionately impact small advisers, potentially creating barriers to entry and stifling competition. Furthermore, the SEC should explore potential alternatives and solicit public opinions to ensure that the proposed regulations strike the right balance between investor protection and the sustainable growth of the advisory industry. Thank you for considering my public comment on the proposed rule "Safeguarding Advisory Client Assets." I hope that the SEC carefully considers the issues raised and takes the necessary steps to address the concerns outlined. Should you require any further information or clarification, please do not hesitate to reach out to me. Sincerely, Amin Nazarian