Oct. 30, 2023
Dear Sir or Madam, I am writing to submit my public comment on the proposed rule "Safeguarding Advisory Client Assets" by the Securities and Exchange Commission (SEC). I have carefully reviewed the proposal and have several concerns that I believe require attention and clarification. One major issue I have with the SEC's proposed rule is the unequal treatment of different types of digital assets. The rules fail to provide consistent guidance on how to handle these assets, leading to confusion and potential regulatory arbitrage. The lack of clarity on how different digital assets should be classified and treated could result in unintended consequences and hinder innovation within the industry. As our financial landscape continues to evolve, it is crucial for regulations to keep pace and provide clear guidelines for market participants. Furthermore, the proposed regulations suffer from poorly defined terms, which creates ambiguity and hampers effective implementation. Terms such as "platform," "software," and "ledger" are left undefined, allowing for multiple interpretations. Additionally, the definitions of other critical terms, like "wallet" and "validator," do not align with their commonly accepted technical meanings. This opens the door for potential misinterpretations and inconsistent enforcement, undermining the intended goals of the rule. Clear and precise definitions are essential to ensure a fair and transparent regulatory framework. In order to address these concerns, I urge the SEC to provide specific definitions for key terms related to digital assets within the proposed rule. Additionally, it is crucial that the SEC engages with industry experts to develop a framework that accommodates technological advancements without stifling innovation. Encouraging collaboration between regulators and industry participants will ensure that the proposed regulations are effective and adaptable to changing market dynamics. Furthermore, I appreciate the SEC's efforts to enhance investor protections and shore up any potential gaps in the custody rule. However, it is important to strike a balance between safeguarding client assets and imposing undue burdens on investment advisers. Regulatory compliance costs, as outlined in the economic analysis, should be carefully evaluated to prevent unintended consequences, such as reduced access to investment advice for smaller investors or increased consolidation in the industry. In conclusion, I appreciate the SEC's commitment to investor protection and recognize the importance of updating regulations to address the evolving nature of the advisory industry. However, I believe that the proposed rule still requires further refinements and clarity, particularly regarding the treatment of different types of digital assets and the definitions of key terms. I encourage the SEC to consult with industry experts and conduct a thorough impact analysis to ensure that the final rule strikes the appropriate balance between investor protection and industry innovation. Thank you for considering my comment. I trust that you will carefully review and consider the points I have raised. Please feel free to contact me if you require any further information or clarification. Sincerely, Timothy Benjamin