Oct. 28, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposal "Safeguarding Advisory Client Assets." While I recognize the importance of enhancing investor protections and addressing gaps in the custody rule, I have several concerns regarding the clarity and implications of certain aspects of the proposed rule. Specifically, I would like to focus on the lack of clarity on the definition of digital assets and the potential challenges it may pose for investment advisers. The proposed rule aims to broaden the coverage to include a broader range of investments held in a client's account, which encompasses digital assets. However, the proposal fails to provide clear guidance on what exactly constitutes a digital asset. This lack of clarity could lead to confusion and potential misinterpretation, resulting in inadvertent non-compliance by investment advisers. Digital assets, such as cryptocurrencies, are unique assets built on blockchain technology that are transforming the finance industry. However, their regulatory classification and treatment remain uncertain. As a result, the proposal's failure to offer clear parameters for digital assets may hinder market participation and innovation, ultimately impeding the growth potential of this burgeoning industry. While it is understandable that digital assets pose new challenges in terms of custody and exclusive control, it is crucial to provide clear guidelines to enable investment advisers to adequately safeguard these assets. Without such clarity, advisers may struggle to establish best practices and robust control mechanisms, potentially exposing client assets to risks. The SEC should consider working closely with industry experts and stakeholders to develop a comprehensive framework specifically addressing digital assets. This framework should provide clarity on custody requirements, exclusive control, and other relevant considerations specific to digital asset management. By doing so, the SEC can foster innovation and ensure investor protection in the rapidly evolving digital asset landscape. Furthermore, it would be prudent for the SEC to collaborate with other regulatory bodies to establish a coordinated approach to regulating digital assets. Harmonization of regulations across jurisdictions would not only reduce regulatory arbitrage but also promote investor confidence in this emerging asset class. In conclusion, while I appreciate the SEC's effort to enhance investor protections through the "Safeguarding Advisory Client Assets" proposal, I urge the Commission to provide clear guidance on the definition and treatment of digital assets. By doing so, the SEC can foster a conducive regulatory environment that encourages innovation, ensures investor protection, and promotes the healthy growth of the digital asset industry. Thank you for considering my concerns and feedback. Sincerely,