Oct. 30, 2023
Dear Securities and Exchange Commission, I, Graham Thompson, would like to express my concerns regarding the proposed "Safeguarding Advisory Client Assets" rule. While I appreciate the Securities and Exchange Commission's efforts to enhance investor protections and address gaps in the custody rule, I believe there are several areas of the proposal that require further clarification and consideration. First and foremost, I am concerned about the lack of clarity on the definition of digital assets. The proposed rule does not provide clear guidance on what constitutes a digital asset, which can lead to confusion and potential misinterpretation. Terms like "platform," "software," and "ledger" are used without proper definition, and definitions of other terms like "wallet" and "validator" do not align with their technical meaning. This lack of clarity not only hampers the ability of investment advisers to properly comply with the rule, but also leaves room for inconsistent interpretations and potential legal challenges. Furthermore, the proposal includes poorly defined terms that are susceptible to multiple interpretations. This ambiguity can create confusion and hinder efficient compliance. Clear definitions are crucial in regulatory frameworks to ensure consistency and effectiveness. I urge the Securities and Exchange Commission to provide precise and comprehensive definitions of terms used in the proposed rule to eliminate any potential misunderstandings and foster a more consistent regulatory environment. Additionally, I am concerned that the proposed rule may hinder the competitiveness of the United States on a global stage. As the world increasingly embraces digital technology and innovation, it is imperative for regulatory frameworks to provide clarity and flexibility. If the United States fails to provide a clear and favorable environment for digital assets, innovative companies and entrepreneurs may seek opportunities elsewhere, leading to a loss of talent, economic growth, and technological advancements in our country. To address these concerns, I recommend that the Securities and Exchange Commission collaborate with relevant stakeholders, including industry experts and technology professionals, to develop clear and precise definitions for digital assets. Such collaboration would help ensure that the proposed rule avoids unnecessary burdens and supports rather than hampers innovation. Furthermore, I encourage the commission to conduct a thorough economic analysis of the proposed rule to accurately assess its potential impact on efficiency, competition, and capital formation. This analysis should take into account the potential costs and benefits of the rule, the impact on investment advisers, and the potential implications for the broader financial industry. In conclusion, I appreciate the Securities and Exchange Commission's efforts to strengthen investor protections and improve the safeguarding of client assets. However, I believe that further clarification and consideration are necessary to address the concerns regarding the definition of digital assets and the potential impact on U.S. competitiveness. By taking these steps, the Securities and Exchange Commission can ensure that the proposed rule is effective, clear, and supportive of innovation in the rapidly evolving digital asset landscape. Thank you for considering my comments. Sincerely, Graham Thompson