Oct. 23, 2023
To Whom It May Concern, I am writing to submit a public comment on the proposed rule "Safeguarding Advisory Client Assets" by the Securities and Exchange Commission (SEC). While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I have some concerns regarding the lack of clarity on the definition of digital assets and the potential privacy implications associated with this proposal. Firstly, I find that the proposed rule fails to provide clear guidance on what constitutes a digital asset. In today's rapidly evolving digital landscape, it is crucial to establish a comprehensive and precise definition to avoid confusion and potential misinterpretation. The lack of clarity raises concerns about unintended consequences and regulatory uncertainties, which may hinder investment advisers from effectively safeguarding client assets. Therefore, I urge the SEC to provide greater clarity on the definition of digital assets to ensure consistent interpretation across the industry. Additionally, I am concerned about the privacy and safety implications associated with the proposal. The current rule requires investment advisers to provide written notice to clients when opening an account with a custodian, including custodial information and account details. While the intent behind this requirement is to enhance transparency, it also raises privacy concerns. Requiring sensitive account information to be shared with multiple custodians may expose clients to increased risks of identity theft, fraud, and unauthorized access to their financial data. Furthermore, the proposal grants access to client information to a wider network of custodians, potentially compromising the privacy and security of personal financial information. The increased exposure of sensitive data, including social security numbers, to multiple third parties raises concerns about data breaches and unauthorized use of personal information. Given the rising incidents of data breaches in recent years, it is crucial that the SEC thoroughly considers the privacy implications of expanding access to client information and implements robust safeguards to protect investor privacy. In light of these concerns, I respectfully urge the SEC to consider the following recommendations: 1. Provide clear and comprehensive guidance on the definition of digital assets to avoid confusion and misinterpretation. 2. Evaluate the privacy and security risks associated with expanding access to client information and ensure that robust safeguards are in place to protect investor privacy. 3. Engage in a thorough assessment of the potential impact of the proposed rule on investor privacy and conduct a cost-benefit analysis to determine if the benefits outweigh the privacy risks. 4. Explore alternative approaches that strike a balance between investor protection and the privacy concerns inherent in sharing sensitive financial information with multiple custodians. In conclusion, while I support the SEC's efforts to enhance investor protections and address gaps in the custody rule, I believe it is essential to address the lack of clarity on the definition of digital assets and carefully consider the privacy and safety implications associated with the proposed rule. By providing clear guidance and implementing robust safeguards, the SEC can ensure that investor privacy is protected while achieving its goal of enhancing investor protections. Thank you for considering my concerns. I trust that the SEC will take these into account and work towards a comprehensive rule that effectively safeguards client assets without compromising privacy. Sincerely, Mark Lloyd