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 agency's efforts to enhance investor protection and address gaps in the custody rule, I believe there are a few areas of the proposal that require further clarity and consideration. One specific concern is the lack of clarity regarding the definition of digital assets. Given the rapid developments in technology and the emergence of digital currencies like cryptocurrency, it is crucial that the proposal provides clear guidance on what constitutes a digital asset. Without clear definitions, there is a risk of confusion and potential misinterpretation, which could have unintended consequences for investors and investment advisers alike. Digital assets, particularly cryptocurrencies, have been transformative in the financial industry. However, they also present unique challenges and regulatory uncertainties. It is essential that the SEC establishes a clear framework for the custody and safeguarding of these assets to ensure investor protection while also allowing for innovation and growth in the digital asset space. Additionally, I would like to address the economic analysis conducted as part of the proposal. While I understand the challenge of estimating economic effects due to varying industry practices, I urge the SEC to consider the potential impact on competition, efficiency, and capital formation. It is crucial to strike a balance between investor protection and the potential costs incurred by investment advisers and qualified custodians. The additional compliance requirements proposed in the rule may increase costs and limit competition, potentially hindering access to advisory services for certain investors. In terms of compliance costs, I believe it is important to weigh the benefits of enhanced investor protection against the burden imposed on investment advisers. The proposed rule may require significant adjustments and investments in technology, staff training, and the establishment of new controls. Therefore, I encourage the SEC to carefully consider the magnitude of these costs and explore potential alternatives that could achieve the same investor protection goals without creating an unreasonable burden on advisers. Furthermore, I would like to emphasize the need for ongoing dialogue and collaboration between the SEC and industry participants. As the digital asset landscape continues to evolve, it is crucial for regulators to engage with industry stakeholders to ensure that regulatory frameworks remain effective, adaptable, and transparent. This cooperation can help mitigate potential unintended consequences and promote a robust and inclusive digital asset ecosystem. In conclusion, I appreciate the SEC's commitment to investor protection through the proposed rule "Safeguarding Advisory Client Assets." While supporting the agency's objectives, I urge the SEC to provide greater clarity on the definition of digital assets and consider the potential economic impact of the proposed rule. Additionally, I recommend ongoing collaboration between the SEC and industry participants to address emerging challenges in the digital asset space. Thank you for considering my comments. I look forward to future discussions and the opportunity to contribute to the regulatory process. Sincerely, Jens