Oct. 30, 2023
Dear Sir or Madam, I am writing to submit a public comment on the proposed rule "Safeguarding Advisory Client Assets" from the Securities and Exchange Commission (SEC). As an individual interested in investor protection and regulatory oversight, I have carefully reviewed the proposal and would like to voice my concerns regarding certain aspects of the rule. First and foremost, I would like to address the lack of clarity surrounding the definition of digital assets within the proposed rule. While it is commendable that the SEC aims to address the safeguarding of client assets in the rapidly evolving landscape of investment advisory services, the lack of clear guidelines on what constitutes a digital asset can lead to confusion and potential misinterpretation. It is essential that the SEC provides a precise definition to avoid any unintended consequences and ensure consistent application of the rule. Furthermore, I believe that the proposed rule may result in excessive reporting requirements for participants in decentralized finance (DeFi). The regulations seem to encompass a wide range of actors in the industry, which could lead to multiple inconsistent reports being generated for the same transactions. This not only creates unnecessary administrative burden but also hinders the efficiency and transparency of DeFi transactions. I encourage the SEC to consider streamlining the reporting requirements to avoid redundant reports and promote a more conducive environment for innovation within DeFi. In addition to the specific concerns I have outlined above, I would also like to express my general appreciation for the SEC's efforts in enhancing investor protections and addressing gaps in the custody rule. The proposed rule explores amendments to the current rule, introduces recordkeeping requirements, and highlights the importance of segregating client assets from adviser assets. These measures are crucial in safeguarding investor interests and mitigating potential risks within the advisory industry. Moreover, I appreciate the SEC's acknowledgment of the economic effects of the proposed rule. The comprehensive economic analysis considers both the costs and benefits of the amendments, recognizing the varying practices among investment advisers. It is vital to strike a balance between investor protections and compliance costs while promoting efficiency, competition, and capital formation. I commend the SEC for seeking public input on reasonable alternatives and potential overlooked benefits and costs, as this inclusive approach fosters a more robust regulatory framework. Furthermore, the proposed rule includes provisions for the paperwork reduction act analysis, demonstrating the SEC's commitment to minimize the burden for investment advisers. While it is essential to obtain the necessary information for regulatory oversight, it is equally important to ensure that the reporting requirements are reasonable and do not unduly burden small entities. I believe that a careful examination of the estimated burden and a solicitation of comments on the impact of the proposed rule on small entities can help strike an appropriate balance. In conclusion, I applaud the SEC's efforts to enhance investor protections and address gaps in the custody rule through the proposed rule "Safeguarding Advisory Client Assets." However, I urge the commission to provide further clarity on the definition of digital assets and streamline reporting requirements for participants in decentralized finance. By doing so, the SEC can ensure effective regulation while fostering innovation and efficiency in the advisory industry. Thank you for considering my comments on this important matter. I appreciate the opportunity to contribute to the dialogue, and I encourage the SEC to carefully consider the concerns and suggestions raised by the public as part of the rulemaking process. Sincerely, Stefan Wolf