Oct. 23, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the "Safeguarding Advisory Client Assets" proposal. While I appreciate the agency's efforts to enhance investor protections and address gaps in the custody rule, I believe there are certain areas where the proposed rule falls short in providing clear and consistent guidance. In particular, my concerns revolve around the unequal treatment of different types of digital assets and the poorly defined terms used in the proposal. Firstly, the proposed rules exhibit inconsistencies in their treatment of different types of digital assets. This not only creates confusion but also presents the potential for regulatory arbitrage. The proposal fails to provide a comprehensive framework for addressing the unique characteristics of these assets, leading to unequal treatment. As digital assets continue to evolve and gain prominence in the financial industry, it is imperative that regulatory rules are designed to accommodate these innovations while instilling investor confidence. Consequently, it is essential for the SEC to ensure that the proposed rules are fair, clear, and allow for the proper safeguarding of all types of digital assets. Furthermore, the poorly defined terms used in the proposal pose significant challenges in implementation and interpretation. Words such as "platform," "software," and "ledger" lack a definitive and standardized meaning. As a result, they become susceptible to multiple interpretations, leading to confusion among investment advisers and complicating compliance efforts. Additionally, even terms such as "wallet" and "validator," which are defined in the proposal, fail to accurately capture their technical meaning. This omission not only hinders effective communication within the industry but also undermines regulatory clarity. To ensure the proposal is practical and enforceable, it is crucial for the SEC to provide concise and well-defined terms that align with industry norms. It is vital to acknowledge that the proper regulation of digital assets is a complex task. However, it is essential to strike a balance between fostering innovation and safeguarding investor interests. By adopting a regulatory approach that is flexible, comprehensive, and technologically informed, the SEC can address the risks associated with digital assets while promoting fair and efficient markets. In conclusion, I urge the Securities and Exchange Commission to address the concerns highlighted above to ensure that the proposed rule on the safeguarding of advisory client assets effectively enhances investor protections. By providing equal treatment for different types of digital assets and clarifying the terminology used in the proposal, the SEC can significantly contribute to the development of a robust regulatory framework. I appreciate the opportunity to provide input on this important matter and trust that my comments will be carefully considered. Sincerely, Maurice