Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets". While I appreciate the goal of enhancing investor protections and addressing gaps in the custody rule, I believe that there are several areas of the proposal that lack clarity, specifically in relation to the definition of digital assets. One of my main concerns is the lack of clarity on the definition of digital assets. The proposal does not provide clear guidance on what constitutes a digital asset, leading to confusion and potential misinterpretation. Terms such as platform, software, and ledger are used without proper definition, making it difficult for investment advisers to comply with the rule and for regulators to enforce it consistently. Furthermore, the proposal's definition of other terms, such as wallet and validator, are insufficient and do not reflect their technical meaning in the digital asset space. This creates ambiguity and opens the door for varied interpretations, undermining the effectiveness and consistency of the rule. It is crucial that the SEC provides a clear and comprehensive definition of digital assets in order to ensure consistent understanding and application of the proposed rule. By doing so, advisers will be better equipped to safeguard client assets and regulators will have a stronger basis for oversight. In addition to the lack of clarity on the definition of digital assets, I also have concerns about other poorly defined terms in the proposal. Terms like platform, software, and ledger are pivotal to the understanding of digital assets, yet their definitions in the proposal are open to interpretation. This ambiguity creates uncertainty for investment advisers and hampers their ability to fully comply with the rule. In order to provide effective regulations, it is crucial that the SEC clearly defines these terms and avoids potential misinterpretation. By providing robust and specific definitions, investment advisers will be better equipped to comply with the rule, leading to more effective protection of client assets. In conclusion, while I appreciate the SEC's efforts to improve investor protections, I strongly believe that the lack of clarity on the definition of digital assets and other poorly defined terms in the proposed rule undermine its effectiveness. I urge the SEC to address these concerns and provide clear and comprehensive definitions to ensure consistent understanding and application of the rule. This will enable investment advisers to effectively safeguard client assets and promote transparency and confidence in the advisory industry. Thank you for considering my comments. Sincerely, D.H.