Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing to provide my comments and concerns regarding the proposed rule "Safeguarding Advisory Client Assets." As an investor and someone interested in the regulatory landscape, I have carefully reviewed the proposal and would like to express my thoughts on specific areas that require further clarification and nuance. One area of concern is the lack of clarity on the definition of digital assets. While the rule does acknowledge the inclusion of crypto assets, it fails to provide clear and concise guidelines on what constitutes a digital asset. The proposal utilizes undefined terms such as platform, software, and ledger, which can be interpreted in a multitude of ways. Additionally, the definition of terms like wallet and validator lacks technical specificity, which may lead to misinterpretation and confusion among investors and institutions alike. It is essential for the SEC to provide precise definitions and concepts in order to avoid inconsistent and conflicting interpretations. The rapid evolution of the digital asset space necessitates a clear and comprehensive understanding of the various types of assets within this realm, and any regulatory framework should reflect this. Moreover, the proposed rule exhibits limitations in its application to safeguard client assets that cannot be maintained with a qualified custodian. While addressing the issue is commendable, the requirements surrounding enhanced recordkeeping, separation of duties, and regular reviews lack detailed guidance. Without a clear methodology and standardized approach, investment advisers may struggle to implement effective practices, potentially leaving client assets vulnerable. In addition, the proposed rule fails to sufficiently address the potentially burdensome compliance costs associated with the implementation of these safeguards. Considering the vast differences in custodial practices and existing controls among investment advisers, a one-size-fits-all approach may prove to be impractical and disproportionately costly for certain firms. A more tailored approach, considering the specific circumstances of each adviser, could help strike a better balance between investor protection and regulatory efficiency. Furthermore, the economic analysis provided in the proposal could benefit from a more detailed breakdown of the anticipated costs and benefits. The qualitative and quantified assessments presented are a step in the right direction but fail to fully capture the potential impact on advisory services, competition, and compliance costs for qualified custodians. A deeper exploration of the economic effects, along with concrete data and industry insights, would greatly enhance the transparency and effectiveness of the proposed rule. As a concerned party, I urge the SEC to carefully reconsider and address these concerns to ensure the rule achieves its intended goals of enhancing investor protections while promoting innovation and competition within the advisory industry. The implementation of clear and precise definitions for digital assets, better guidance on safeguarding non-custodial assets, as well as a more comprehensive economic analysis, will foster a more robust and effective regulatory framework. Thank you for considering my comments on these vital matters. I appreciate the opportunity to contribute my perspective on this proposed rule. Please do not hesitate to reach out if you require any further input or clarification on the issues raised. Sincerely, Andrew Beck