Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule titled "Safeguarding Advisory Client Assets." While I acknowledge the SEC's intentions to enhance investor protections and address gaps in the custody rule, there are several issues in the proposed rule that need to be addressed. Specifically, my concerns lie with the lack of clarity on custody requirements for digital assets and the poorly defined terms used in the regulation. Firstly, the proposed rule fails to provide clear guidelines on custody requirements for digital assets. Given the increasing presence of digital assets in the investment landscape, it is crucial for the SEC to provide clear and comprehensive guidance on how investment advisers can effectively safeguard these assets. Without clear guidelines, market participants are left in a state of uncertainty, which can potentially hinder the growth of this emerging asset class. I urge the SEC to work towards providing a more specific framework for custody of digital assets, considering the unique characteristics and challenges they present. Furthermore, the proposed rules suffer from poorly defined terms, such as "platform," "software," and "ledger." These terms are susceptible to multiple interpretations and lack the necessary specificity to enable consistent interpretation and application of the regulation. Additionally, the definition of terms like "wallet" and "validator" deviates from their widely accepted technical meanings. This disparity in definition further adds to the confusion and undermines the effectiveness of the proposed rules. It is paramount for the SEC to provide clear and precise definitions of these terms to ensure uniform understanding and compliance among market participants. Additionally, I am concerned about the potential breadth of the proposed rule. It is crucial to strike a balance between investor protections and regulatory burdens. The proposal, as it stands, has the potential to categorize any asset as a security, which may result in unnecessary compliance requirements and burdens for investment advisers. It is important to have a precise and targeted definition of securities to avoid unintended consequences that could stifle investment and hinder capital formation. In conclusion, while I appreciate the SEC's efforts to enhance investor protection and address concerns related to client asset safeguarding in the advisory industry, I urge the commission to address the aforementioned concerns. Clarity in custody requirements for digital assets, precise definitions of key terms, and the avoidance of overly broad categorizations will help create a robust regulatory framework. This, in turn, will foster investor confidence and enable efficient capital formation. Thank you for considering my comments. I trust that the SEC will carefully evaluate the concerns raised by various stakeholders to implement a rule that strikes the right balance between investor protection and regulatory compliance. Sincerely, Anonymous