Oct. 22, 2023
Dear Securities and Exchange Commission, I wanted to give my thoughts on the proposed rule "Safeguarding Advisory Client Assets." I think it's a good idea to enhance investor protections and fix gaps in the custody rule. But there are some things I'm not sure about and have concerns with. One thing that I don't understand is the definition of digital assets. It's not clear what qualifies as a digital asset in the proposal. This could lead to confusion and people not knowing how to follow the rules. I think it's important to give a clear definition so that everyone understands what's expected. Especially with things like cryptocurrency becoming more popular, it's crucial to have clear guidelines. I'm also not sure how investment advisers can protect digital assets effectively. The proposal doesn't give enough guidance on how to keep these assets safe. It's important to have strong measures in place to make sure digital assets don't get lost or stolen. The proposal should provide more detailed guidance on how to safeguard these assets, especially with new technology like blockchain. Another concern I have is the exceptions for certain assets that can't be held by a qualified custodian. The proposal mentions that there will be enhanced recordkeeping and regular reviews for these assets. But it doesn't explain exactly what those requirements are. It's important to have clear guidelines on how to protect these assets, even if they can't be held by a qualified custodian. We need to make sure there are enough safeguards in place to prevent any mistakes or misuse. I think it's a good idea to separate client assets from the adviser's assets, like the proposal suggests. But I wonder if there are too many exceptions to this rule. It's important to prioritize client asset protection, even if there are special circumstances. We should make sure that the exceptions don't take away from the main goal of keeping client assets safe. The proposal also talks about delivering written notice to clients when opening an account with a custodian. I agree with this idea because it promotes transparency. But I think it should also include all the necessary information for clients to independently verify the custody of their assets. That way, clients have all the information they need to feel secure about their investments. Lastly, I want to mention the surprise examination requirement. I think it's important to have a written agreement with an independent public accountant for this examination. However, we should be careful about the exceptions for advisers with discretionary authority over client assets and those with custody due to a standing letter of authorization. These exceptions could pose risks, so we should have strong controls and oversight in place to protect clients. In conclusion, I think the proposed rule "Safeguarding Advisory Client Assets" is a good step towards protecting investors. But there are some areas that need more clarification and guidance. We need a clear definition of digital assets and stronger measures to safeguard them. The exceptions for certain assets and the priority of client asset protection should be carefully reviewed. And overall, transparency, independent oversight, and comprehensive recordkeeping are crucial for effective implementation of the rule. Thank you for taking the time to consider my thoughts. Sincerely, Kianoush Akrami