Oct. 30, 2023
Dear [Agency Name], I am writing to express my concerns regarding the proposed rule on "Safeguarding Advisory Client Assets" by the Securities and Exchange Commission (SEC). While I acknowledge the importance of enhancing investor protections and addressing gaps in the custody rule, I believe that certain aspects of the proposed rule require further consideration and clarification. One area of concern for me is the lack of clarity on the definition of digital assets. The proposal fails to provide clear guidance on what constitutes a digital asset, which can lead to confusion and potential misinterpretation. This is particularly concerning given the rapid growth and transformation of digital assets, such as cryptocurrencies, which have emerged as an integral part of the financial industry. It is essential that the SEC provides precise definitions and guidelines regarding digital assets to ensure that investment advisers can effectively safeguard these assets. Without such clarity, investment advisers may face difficulties in navigating the regulatory landscape and implementing appropriate measures to protect client assets. Furthermore, I am alarmed by the potential implications of applying decades-old laws to regulate digital assets. The proposal seems to rely on existing laws that were established over 90 years ago, which may not adequately address the unique characteristics and complexities of digital assets. It is crucial to recognize that digital assets, including cryptocurrencies built on blockchain technology, have fundamentally transformed the financial landscape and require a regulatory framework tailored to their specific features. I urge the SEC to consider the dynamic nature of digital assets and to develop regulations that strike a balance between investor protection and innovation. This can be achieved through collaboration with industry experts, ensuring that the regulatory framework aligns with the evolving dynamics of digital assets. In addition, it is crucial to consider the potential impact of the proposed rule on innovation and competition within the advisory industry. While investor protection is of paramount importance, overly burdensome regulations may stifle innovation and hinder competition. It is essential to strike the right balance between protecting investors and fostering an environment that promotes growth, efficiency, and capital formation. Moreover, the cost burden imposed by the proposed rule should be carefully evaluated, especially for small entities. The initial regulatory flexibility analysis suggests that small advisers registered with state authorities would not be significantly impacted. However, it is important to conduct a comprehensive analysis of the potential impact on small advisers to ensure that compliance costs do not disproportionately affect their ability to provide essential advisory services. In conclusion, while I support the SEC's objective of enhancing investor protections and addressing gaps in the custody rule, I believe that further clarity on the definition of digital assets and a regulatory framework tailored to their unique nature is necessary. Moreover, it is vital to carefully consider the impact of the proposed rule on innovation, competition, and the economic viability of small entities. Thank you for considering my comments and for providing an opportunity for public input. I hope that my concerns can contribute to the development of a robust and balanced regulatory framework for the safeguarding of advisory client assets. Sincerely, William Hancock