Oct. 22, 2023
securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Subject: Safeguarding Advisory Client Assets - Docket ID: JC-2021-006 To Whom It May Concern, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets" issued by the Securities and Exchange Commission (SEC). As an individual with a keen interest in investor protections and regulatory practices, I have thoroughly reviewed the draft rule and would like to express my concerns and suggestions. Firstly, I believe there is a potential overreach of regulatory authority in the SEC's proposed rule. While it is vital to enhance investor protections, it is equally important to maintain clear jurisdictional boundaries among regulatory agencies. I am concerned that the proposed rule may encroach on areas that should be rightfully regulated by other agencies, potentially leading to overlapping or conflicting regulations. I strongly urge the SEC to ensure that this rule does not exceed its regulatory authority and to coordinate effectively with other relevant agencies to ensure a comprehensive and streamlined regulatory framework. One area of particular concern within the proposed rule is the treatment of digital assets, including cryptocurrencies. The emergence of digital assets, built on blockchain technology, has transformed the financial landscape. However, regulatory uncertainties surrounding digital assets pose challenges to both market participants and regulators alike. While it is commendable that the SEC acknowledges the application of the rule to digital assets, I believe there is a need for further clarification and guidance. The definition of assets, as provided in the proposed rule, may not fully capture the unique characteristics and complexities of digital assets. A clearer delineation of the custody requirements for digital assets, including protocols for demonstrating exclusive control, would provide much-needed certainty and foster innovation within this rapidly evolving sector. Additionally, the proposed rule should provide more clarity and specificity regarding the exceptions and requirements for assets that cannot be maintained with a qualified custodian. I acknowledge the importance of enhanced recordkeeping, separation of duties, and regular reviews for such assets. However, the rule should outline specific criteria and standards for evaluating the adequacy of these safeguarding measures. This will not only provide clarity for investment advisers but also facilitate consistent and effective oversight by the SEC. Furthermore, I believe that the proposed rule could benefit from heightened emphasis on the segregation of client assets. While exceptions are provided, it is crucial to prioritize the protection of client assets and ensure their clear segregation from the adviser's assets. Strong safeguards in this regard will instill investor confidence and contribute to the overall integrity of the market. Regarding the proposed amendments to the surprise examination requirement, I commend the SEC's efforts to reduce the risk of asset loss and safeguard client assets against unauthorized use. However, I suggest that the implementation of a written agreement with an independent public accountant for surprise examinations should be scalable and tailored to the specific circumstances of each investment adviser. A one-size-fits-all approach may result in unnecessary compliance burdens for smaller advisers without commensurate benefits to investor protection. Flexibility in the application of this requirement will maintain the intended safeguards while minimizing undue regulatory burdens. In reviewing the economic analysis provided by the SEC, I commend the consideration of costs and benefits associated with the proposed rule. However, I would encourage the SEC to conduct a deeper assessment of the potential economic impacts, including the estimated compliance costs for investment advisers. This will ensure that the rule strikes a balance between investor protections and preserving the overall efficiency and competitiveness of the investment advisory sector. In conclusion, I appreciate the SEC's efforts to enhance investor protections through the proposed rule. However, it is crucial to maintain regulatory clarity, particularly in emerging areas such as digital assets. I believe more precise guidance and comprehensive evaluation of potential economic effects will strengthen this rule and provide meaningful and practicable safeguards for investor assets. Thank you for considering my comments. I would appreciate the opportunity for further discussion should you require any additional insights or information on the matters raised in this comment. Furthermore, if there are any other areas of concern or questions you would like me to address, I would be more than willing to provide further comment. Sincerely.