Dear Securities and Exchange Commission, I am writing to provide my feedback on the proposed rule, "Safeguarding Advisory Client Assets," which aims to enhance investor protections and address gaps in the custody rule. I would like to commend the SEC for taking steps to ensure the safeguarding of client assets by investment advisers. However, I would like to express my concerns regarding certain aspects of the proposed rule and suggest alternatives and improvements for consideration. Firstly, the scope of the rule expansion, which includes a broader range of investments held in a client's account, raises questions about its practicality and the potential burden it may place on investment advisers. While it is important to adapt regulations to changing investment landscapes, it is crucial to strike a balance between enhanced investor protections and maintaining the efficiency of advisory services. Moreover, I am particularly concerned about the potential challenges in demonstrating exclusive control over crypto assets, as highlighted in the proposed rule. The unique characteristics of cryptocurrencies make the application of traditional custody concepts challenging. It is important for the SEC to provide clear guidance on custody requirements for crypto assets, while also considering the need for flexibility to promote innovation in the digital asset space. Additionally, the proposed rule addresses the issue of certain assets unable to be maintained with a qualified custodian, requiring enhanced recordkeeping, separation of duties, and regular reviews. While these measures aim to safeguard client assets, there is a need to ensure that the compliance burden for investment advisers is reasonable and commensurate with the risks involved. It would be beneficial for the SEC to provide further guidance on best practices in these scenarios to mitigate any unintended excessive burden on advisers. Another critical aspect of the proposed rule is the requirement for the segregation of client assets from the adviser's assets. While this is a crucial safeguarding measure, exceptions need to be carefully evaluated to ensure they do not undermine the protection of client assets. The rule should prioritize the protection of client assets above all else, and any exceptions should be limited and subject to stringent approval processes to mitigate potential risks. Furthermore, the proposed rule introduces amendments to the surprise examination requirements, which help safeguard client assets and reduce the risk of loss. However, the exceptions provided for advisers with discretionary authority over client assets and those with custody solely due to a standing letter of authorization (SLOA) might create gaps in the safeguarding framework. The SEC should reassess these exceptions and strengthen requirements for such advisers to ensure the highest level of protection for clients. The amendments to the investment adviser recordkeeping rule, as outlined in the proposed rule, will undoubtedly improve oversight and investor protection. However, it is important for the SEC to strike the right balance in terms of the scope and specificity of the recordkeeping requirements. Excessive and overly burdensome requirements may divert resources away from client services and hinder the ability of advisers to cater to their clients' needs effectively. The changes to Form ADV, which aim to enhance transparency and regulatory oversight, are commendable. However, it is vital to ensure that the additional information required in Form ADV is necessary and relevant for effective oversight. The SEC should carefully assess the information collection burden and consider whether any redundancies or excessive requirements can be eliminated to streamline the reporting process and alleviate the compliance costs for investment advisers. In terms of the economic analysis, I appreciate the SEC's efforts to assess both qualitative and quantitative impacts of the proposed rule. However, the estimated compliance costs provided must be based on realistic assumptions and should take into account the varying practices among investment advisers. It is crucial for the SEC to conduct a thorough cost-benefit analysis and ensure that the benefits of the proposed rule outweigh its estimated costs to avoid unintended consequences, especially for small entities. Moreover, as the SEC considers the economic effects on efficiency, competition, and capital formation, it is important to strike the right balance between enhanced investor protections and the potential impact on advisory services, competition, and compliance costs for qualified custodians. The SEC should carefully evaluate the potential unintended consequences of the proposed rule and seek input from industry stakeholders to ensure that the rule achieves its objectives without stifling innovation and market competition. I would like to request the SEC to provide clarity on reasonable alternatives to the proposed rule. Understanding the SEC's perspective on potential alternatives will help industry participants and interested parties provide more constructive feedback and suggestions. Additionally, the SEC should encourage commenting parties to identify any potential overlooked benefits and costs to ensure that all aspects of this proposal are thoroughly evaluated. Lastly, I would like to express my appreciation for the SEC's consideration of small entities in the proposed rule. However, it is crucial for the SEC to comprehensively assess the potential impact of the rule on small entities and determine if any modifications or accommodations are necessary to effectively address their needs. Further clarification on compliance requirements specific to small advisers may be helpful. In conclusion, I commend the SEC for its efforts to enhance investor protections through the proposed rule. While I acknowledge the importance of addressing gaps in the custody rule and ensuring the safeguarding of client assets, I have raised several concerns and suggested areas for improvement. I believe that striving for a balanced approach and considering the potential unintended consequences or gaps in the proposal will result in a rule that best serves the interests of both investors and investment advisers. Thank you for considering my comments on this important matter. Sincerely, Brad Federer