Inadequate Protection for Vulnerable Groups - The proposed amendments to SEC Rule 206(4)-2 regarding the custody of digital assets do not provide adequate protections for vulnerable investor groups, particularly retail investors and senior citizens. The complexities of digital asset custody arrangements create significant risks that these groups may not fully understand. By allowing flexible custody models that permit shared control over private keys, the proposed rule does not sufficiently prioritize the safekeeping of assets. The proposed rule should be revised to require qualified custodians to have full, independent control over digital assets to prevent loss. As SEC Chair Gary Gensler noted, crypto platforms generally do not have exclusive control, leaving investors vulnerable: "When these platforms fail - something we've seen time and again - investors' assets often have become property of the failed company, leaving investors in line at the bankruptcy court."[1] Retail investors often lack the sophistication to evaluate novel custody arrangements. And senior citizens, who are frequent targets of financial fraud, may not grasp the risks of shared-control models. In addition, the proposed rule does not adequately restrict state-chartered custodians that lack a strong oversight track record. The SEC itself questioned whether such entities can provide necessary safeguards.[2] Allowing these entities to serve as qualified custodians exposes vulnerable retail investors to potential fraud or mismanagement. The SEC should limit qualified custodian status only to custodians subject to direct federal regulation and supervision. Finally, the proposed rule grants excessive discretion to determine what constitutes "reasonable care" in securing digital assets. Reasonable care should be clearly defined to require cold storage in nearly all circumstances. Hot wallets and other convenient but less-secure options should be restricted to protect against theft and unauthorized transfers that disproportionately harm unsophisticated investors. In summary, while modernizing custody requirements for digital assets is a worthy goal, the SEC must fulfill its mission to safeguard vulnerable retail investors and seniors. This requires tighter control over qualified custodians and stricter security standards. The proposed rule falls short on both counts. I urge the SEC to reconsider these aspects of the proposal to provide stronger protections where they are most needed. [1] Gensler Remarks, March 2023 [2] SEC Release at 76