Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets" (Release No. IA-##-####). While I appreciate the SEC's effort to enhance investor protections and address gaps in the custody rule, there are some areas in the proposal that lack clarity and could potentially create challenges for market participants, specifically in relation to digital assets. One of my key concerns revolves around the lack of clarity on reporting requirements for digital assets. The proposed regulations introduce reporting requirements for a broad range of participants in the decentralized finance (DeFi) space. While the aim is to enhance oversight and protect investors, the regulations risk creating confusion and inconsistency in reporting obligations. The proposed rule covers a wide range of investments, including digital assets, but it fails to provide clear guidance on reporting requirements for such assets. This lack of clarity is concerning given the unique nature of digital assets and the evolving landscape of the DeFi industry. Without specific instructions on how to comply with reporting requirements for digital assets, market participants may generate multiple, inconsistent reports for the same transaction. As decentralized finance continues to gain traction, it is crucial for regulations to provide clear guidelines on reporting obligations to ensure that market participants can confidently comply while avoiding unnecessary burdens. By withholding specific instructions for reporting on digital assets, the proposed rule risks stifling innovation and hindering the growth of this emerging sector. To address this concern, I urge the SEC to provide clear and comprehensive guidance on reporting requirements for digital assets. This guidance should consider the unique characteristics of digital assets and align with existing reporting frameworks to avoid duplication and confusion. By doing so, the SEC can strike a balance between investor protection and fostering innovation in the DeFi space. Furthermore, I recommend that the SEC engage with industry experts and stakeholders in the DeFi community to gather insights and perspectives on reporting requirements. Such collaboration will help ensure that the proposed rule adequately addresses the complexities of reporting digital assets, ultimately leading to more effective regulation and investor protection. In conclusion, while I commend the SEC for its commitment to enhancing investor protections, I believe that clearer guidance on reporting requirements for digital assets is necessary. By providing specific instructions and engaging with the DeFi community, the SEC can create a regulatory framework that effectively safeguards client assets while encouraging innovation and growth in this evolving sector. Thank you for considering my concerns and recommendations. I look forward to the SEC's response and the opportunity for further discussion on this important matter. Sincerely, Keith Wakeland