Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to provide a public comment on the proposed rule "Safeguarding Advisory Client Assets." While I appreciate the agency's efforts to enhance investor protections and address gaps in the custody rule, I have concerns about certain aspects of the proposed regulations. In particular, I am troubled by the potential overreach of regulatory authority and the use of poorly defined terms. Additionally, I would like to raise a concern about the fairness of the market. Firstly, there is a risk that the SEC's proposed rule may exceed its regulatory authority. It is important to ensure that each regulatory agency maintains its appropriate jurisdiction and does not encroach on areas that are clearly the responsibility of other agencies. By expanding the coverage of assets held in a client's account, including discretionary authority in custody, and providing exceptions for specific situations, the proposed rule may inadvertently cross into areas that should be regulated by other entities. I urge the SEC to carefully consider the boundaries of its authority and collaborate with other relevant agencies to ensure a coordinated and comprehensive regulatory framework. Secondly, the proposed regulations contain poorly defined terms that could lead to confusion and inconsistent interpretation. The use of undefined terms such as "platform," "software," and "ledger" opens the door for varied interpretations, which can create inconsistencies in compliance and enforcement. Furthermore, the definitions provided for terms like "wallet" and "validator" do not align with their commonly understood technical meanings. This lack of clarity may impede effective implementation of the rule and hinder the consistent safeguarding of client assets. I urge the SEC to provide clear and precise definitions for all key terms used in the proposed rule to ensure uniform interpretation and application. Lastly, I would like to express my concern about the fairness of the market. While the proposed rule aims to enhance investor protections, it is crucial to consider the broader impact on market fairness and competition. The compliance costs associated with the proposed regulations may disproportionately affect small advisory firms, potentially limiting their ability to compete with larger counterparts. It is essential to strike a balance between safeguarding client assets and promoting a level playing field for all market participants. I encourage the SEC to carefully consider the economic implications and potential market distortions that may arise from the implementation of the proposed rule. In conclusion, I appreciate the SEC's commitment to improving investor protections and addressing gaps in the custody rule. However, I strongly urge the agency to address the aforementioned concerns regarding the potential overreach of regulatory authority, the use of poorly defined terms, and the fairness of the market. Clarifying the boundaries of regulatory jurisdiction, providing clear definitions, and considering the broader economic impact will help ensure the effectiveness and fairness of the proposed rule. Thank you for considering my comments. Sincerely, Adramadus W. Maximus