Oct. 24, 2023
Dear SEC, I am writing to express my concerns regarding the proposed rule on safeguarding advisory client assets. While I understand the intention behind the rule to enhance investor protections, there are several areas that require further clarification and consideration. One area of concern is the lack of clarity on the definition of digital assets. The proposal fails to provide clear guidance on what constitutes a digital asset, leading to confusion and potential misinterpretation. Given the rapid growth and evolution of digital assets, it is crucial to establish a clear and concise definition to ensure compliance and investor protection. Moreover, the proposed rule could have a detrimental impact on emerging markets and products. The rise of digital assets, such as cryptocurrency, has transformed the financial landscape and opened up new opportunities. However, regulatory uncertainties impose challenges on these emerging markets or products. Overly restrictive regulations, without proper consideration for innovation and flexibility, can stifle growth and hamper the potential benefits these technologies can bring. It is essential to strike a balance between investor protection and fostering innovation. Regulations should be tailored to the specific risks and characteristics of emerging financial markets or technologies. Implementing burdensome requirements without fully understanding the implications could hinder progress and impede the development of transformative technologies. Furthermore, the proposed rule's economic analysis should take into account the potential impact on capital formation and competition. While investor protection is of utmost importance, it is also essential to consider the potential benefits and costs associated with the proposed rule. The analysis should assess the efficiency of investments and the promotion of capital formation that can result from enhanced investor protections. Additionally, it should address how the proposed rule may impact advisory services, competition, and compliance costs for qualified custodians. In conclusion, while the goal of the proposed rule is to enhance safeguarding of client assets, it is crucial to address the concerns regarding the clarity of digital asset definitions and the potential impact on emerging financial markets or technologies. Striking a balance between investor protection and fostering innovation will ensure a regulatory framework that encourages growth, while still safeguarding the interests of investors. Thank you for considering these concerns. I appreciate the opportunity to comment and contribute to this important dialogue. Sincerely, Jason P.