Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on "Safeguarding Advisory Client Assets." While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, there are certain aspects of the proposal that require further clarification and consideration, particularly in relation to digital assets. The proposed rule expands the coverage to include a broader range of investments held in a client's account, which is a step in the right direction. However, it does not provide clear guidance on the definition of digital assets, such as cryptocurrencies, leading to confusion and potential misinterpretation. Given the rise of digital assets and their increasing significance in the financial industry, it is crucial for the SEC to provide a precise and comprehensive definition to ensure consistent treatment and safeguarding of these assets. Digital assets, including cryptocurrencies, have transformed the financial landscape and offer unique opportunities for investors. However, regulatory uncertainties surrounding these assets have hindered their mainstream adoption. The lack of clear guidance in the proposed rule only exacerbates these uncertainties, creating a barrier for investment advisers and hindering innovation in the industry. To address this issue, I urge the SEC to work towards developing a robust framework for the safekeeping, custody, and regulation of digital assets. This should include clear definitions, guidelines, and best practices that take into account the unique characteristics and challenges presented by these assets. By providing greater clarity and regulatory certainty, the SEC can foster an environment that encourages responsible innovation while ensuring the protection of investor assets. Additionally, I would like to highlight the importance of considering the potential unintended consequences of overly burdensome regulations. While investor protection is paramount, it is crucial to strike a balance that does not stifle innovation or impose unnecessary compliance costs on investment advisers. The proposed rule should be designed in a way that promotes competition, efficiency, and capital formation, ultimately benefiting both investors and the investment advisory industry. In conclusion, I appreciate the SEC's commitment to enhancing investor protections and addressing gaps in the custody rule through the proposed rule on "Safeguarding Advisory Client Assets." However, further clarity and consideration are necessary, particularly regarding digital assets. I urge the SEC to provide clear guidance on the definition of digital assets and to develop a comprehensive regulatory framework that fosters innovation while ensuring the protection of investor assets. Thank you for considering my comments. Sincerely, Peter Caddick