Oct. 23, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets". While I understand the importance of enhancing investor protections and addressing gaps in the custody rule, there are some areas of concern that I believe need further examination and clarification. First and foremost, the lack of clarity on the definition of digital assets is a significant issue. The proposal fails to provide clear guidance on what constitutes a digital asset, leaving it open to interpretation. Given the rapid developments in the digital asset space, it is crucial to have specific definitions and guidelines in place to ensure proper safeguarding of these assets. Without clear definitions, there is a risk of confusion and potential misinterpretation, leading to inadequate protection for investors. Digital assets, such as cryptocurrency, have emerged as transformative instruments in the financial industry. However, their unique characteristics pose specific challenges when it comes to regulation and custodial requirements. Without clear definitions and guidelines, it becomes difficult for investment advisers to adequately safeguard these assets and ensure compliance with the proposed rule. Additionally, the proposal should address the challenges in demonstrating exclusive control over digital assets. Given the decentralized nature of blockchain technology, it is essential to establish a framework that enables investment advisers to demonstrate exclusive control without compromising the fundamental properties of digital assets. Failure to address this issue may result in a lack of custody solutions for digital assets, creating unnecessary barriers for investment advisers and hindering the growth of this innovative industry. In light of these concerns, I urge the SEC to provide comprehensive and clear definitions of digital assets within the scope of the proposed rule. This will ensure that investment advisers have a clear understanding of their obligations and can implement appropriate safeguards for these assets, thereby enhancing investor protections. Furthermore, I commend the SEC for including a transition period and different compliance dates based on assets under management. This recognizes the diverse nature of investment advisers and allows for a smoother implementation of the proposed rule. It is crucial to provide sufficient time and flexibility for advisers to adapt their practices and comply with the new requirements. In conclusion, while the proposed rule "Safeguarding Advisory Client Assets" is a step in the right direction, it can benefit from further clarification, particularly regarding the definition and safeguarding of digital assets. I encourage the SEC to consider the unique challenges posed by digital assets and ensure that the proposed rule provides clear guidelines for investment advisers to safely manage and custody these assets. This will not only enhance investor protections but also foster innovation and growth in the digital asset space. Thank you for considering my comments. Sincerely, Frank DeSimone