Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets." While I appreciate the SEC's effort to enhance investor protections and address gaps in the custody rule, there are several concerns and issues that I would like to address. One major concern revolves around the unequal treatment of different types of digital assets. The proposed rules classify digital assets inconsistently, leading to confusion and potential regulatory arbitrage. The SEC needs to develop clearer and more comprehensive definitions for terms such as platform, software, ledger, wallet, and validator. These terms are crucial for understanding the regulatory framework around digital assets, and their poorly defined nature would create ambiguity and hinder effective compliance. Moreover, the proposed regulations introduce terms that are susceptible to multiple interpretations, resulting in a lack of clarity. For example, the definition of a platform is insufficiently defined, making it unclear how it applies to different digital asset intermediaries. Similarly, the terms software and ledger, which play critical roles in the ecosystem, lack specificity, leading to potential confusion and inconsistent implementation. Furthermore, the proposed rules define terms like wallet and validator in a manner that does not align with their technical meaning. Such misalignment could result in significant discrepancies between industry practices and regulatory requirements. To ensure effectiveness and avoid unintended consequences, the SEC needs to develop clear and technically accurate definitions that align with existing industry standards. In addition to the concerns related to poorly defined terms, there are also issues surrounding the administrative burden and compliance costs for investment advisers. The proposed amendments to Rule 204-2 and Form ADV require an extensive amount of recordkeeping and reporting, resulting in a substantial burden for investment advisers. While investor protection is of utmost importance, it is crucial to strike a balance between regulatory oversight and the operational feasibility of investment advisers. Reasonable alternatives that mitigate the compliance burden without compromising investor safeguards should be considered. Furthermore, I would like to comment on the economic analysis conducted by the SEC. While the analysis acknowledges the challenge of estimating economic effects due to varying practices among investment advisers, it is imperative that the SEC thoroughly assess the potential costs and benefits in a nuanced manner. The SEC should consider the potential impact on advisory services, competition, and compliance costs for qualified custodians to ensure that the proposed rule complements and promotes efficient capital formation. In conclusion, I urge the SEC to address the issues I have presented regarding the unequal treatment of different types of digital assets and the poorly defined terms within the proposed rule. Additionally, I encourage the SEC to consider the burden placed on investment advisers and review the economic analysis to ensure a balanced approach that fosters investor protection while reducing unnecessary costs and operational difficulties. Thank you for considering my public comment. Sincerely, Steve Oakes Further, customize your Public Comment (Optional). For instance, "Rewrit