Oct. 22, 2023
FROM: Matthew Scott [REDACTED] TO: Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Subject: Public Comment on Proposed Rule "Safeguarding Advisory Client Assets" Dear Sir/Madam, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets" by the Securities and Exchange Commission (SEC), as published in the Federal Register on [publication date]. I. Introduction I commend the SEC's efforts to enhance investor protections through the proposed rule. However, I have concerns regarding the absence of regulatory clarity for security tokens and poorly defined terms. II. Absence of Regulatory Clarity for Security Tokens The proposal does not provide clear regulatory guidelines for security tokens, which are increasingly being used in the investment landscape. This lack of clarity creates uncertainty and hinders investor protection. I urge the SEC to develop specific regulations and guidelines to address the unique characteristics and potential risks associated with security tokens. Without a clear regulatory framework, investors may be exposed to significant risks, and market participants may struggle to comply with existing regulations. III. Poorly Defined Terms One of my concerns with the proposed regulations is the use of poorly defined terms, such as "platform," "software," and "ledger." These terms are susceptible to broad interpretations, leading to confusion and inconsistency in their application. Additionally, the definitions of terms like "wallet" and "validator" do not accurately capture their technical meaning in the context of digital assets. This lack of clarity creates challenges for investment advisers, custodians, and investors in understanding and complying with the proposed rules. I strongly urge the SEC to clarify and refine these terms to ensure consistency and regulatory certainty. IV. How to Determine if an Investment is a Security Another area of concern relates to how investors can determine if the digital asset they are purchasing qualifies as a security. The proposed rule provides insufficient guidance on this matter. The lack of clarity increases the risk of inadvertently engaging in unauthorized activities or failing to comply with applicable regulations. Investors require clear guidelines and criteria to discern whether the digital assets they are acquiring fall under the ambit of securities regulation. I encourage the SEC to develop specific factors or criteria to aid investors in making informed decisions and to ensure that regulations are applied consistently across market participants. In conclusion, I appreciate the SEC's efforts to enhance investor protections through the "Safeguarding Advisory Client Assets" proposal. However, the absence of regulatory clarity for security tokens, poorly defined terms, and the need for clear guidelines on determining if an investment qualifies as a security are critical areas that must be addressed to promote investor confidence and foster innovation. Thank you for considering my comments. I trust that the SEC will carefully examine the concerns raised and take the necessary steps to refine the proposed rule. If there are any additional opportunities for public input, I would welcome the chance to provide further comments or participate in hearings or discussions related to this proposal. Sincerely, Matthew Scott, DC