Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns and opposition to the proposed rule "Safeguarding Advisory Client Assets." While I appreciate the SEC's goal of enhancing investor protections and addressing gaps in the custody rule, I believe there are several issues within the proposal that need to be addressed, particularly regarding the unequal treatment of different types of digital assets. Under the proposed rule, digital assets are included in the definition of assets held in a client's account. However, there is a clear discrepancy in how different types of digital assets are treated. This inconsistency not only leads to confusion among investment advisers but also creates potential regulatory arbitrage, where certain types of digital assets may be preferred over others due to differing regulatory requirements. Digital assets, particularly cryptocurrencies, have emerged as a transformative force in the financial industry. These innovative assets utilize blockchain technology and offer unique value propositions. By failing to provide clear and consistent rules for all types of digital assets, the SEC hinders the development and adoption of these financial instruments. Moreover, the proposed rule's treatment of different types of digital assets can be discriminatory. There is a need for regulators to adapt and create a level playing field for all digital assets, irrespective of their underlying technology or characteristics. By doing so, the SEC can foster innovation without compromising investor protection or fair market practices. I urge the SEC to reconsider its approach and develop a comprehensive framework for all types of digital assets. This framework should consider the unique characteristics and challenges presented by these assets while ensuring consistent rules that promote investor protection and responsible practices in the industry. In addition to addressing the unequal treatment of digital assets, it is crucial for the SEC to provide clear guidance on the application of the safeguarding requirements to digital assets. Given their digital and decentralized nature, demonstrating exclusive control over digital assets can present challenges. Clear guidelines will help investment advisers navigate these complexities and ensure proper safeguarding of client assets. Furthermore, I would like to suggest that the SEC considers collaborating with industry experts and stakeholders to develop practical and effective solutions. By engaging in a cooperative approach, regulators can gain valuable insights and ensure that the rules are not overly burdensome or restrictive, while still achieving the desired investor protection objectives. In conclusion, I urge the SEC to take into account the concerns raised regarding the unequal treatment of different types of digital assets within the proposed rule. It is my belief that a comprehensive and consistent framework for digital assets, combined with clear guidance on safeguarding requirements, will encourage responsible innovation, protect investors, and promote fair and efficient markets. Thank you for considering my comments. I hope that the SEC will carefully review and address the issues presented, ultimately leading to the development of a well-balanced and inclusive regulatory framework for all types of digital assets. Sincerely, Jake Linderer