Oct. 30, 2023
November 1, 2023 Securities and Exchange Commission 100 F Street NE Washington, DC 20549 Attn: File No. S7-12-23 RE: Safeguarding Advisory Client Assets - Proposed Rulemaking Dear Sir/Madam, I am writing to provide a public comment on the proposed rulemaking regarding the safeguarding of advisory client assets, as described under File No. S7-12-23. While I appreciate the Securities and Exchange Commission's (SEC) efforts to enhance investor protections and address the gaps in the current custody rule, I have some concerns and issues with the proposed regulations that I believe deserve careful consideration. One area of concern pertains to the unequal treatment of different types of digital assets. The proposed rules appear to treat various digital assets inconsistently, creating confusion and the potential for regulatory arbitrage. It is crucial to develop a comprehensive framework that recognizes the unique characteristics and risks associated with different digital assets, rather than applying a one-size-fits-all approach. To ensure regulatory clarity and a level playing field, I suggest that the SEC should establish clear definitions and guidelines for different types of digital assets. This could help investment advisers and custodians understand their obligations when safeguarding these assets, as well as ensure that investors are adequately protected. Furthermore, as the SEC moves forward with the proposed rule, it is essential to consider the impact on small entities, such as small advisers registered with state authorities. While it is commendable that most small advisers will not be affected by the proposed rule, it is crucial to carefully examine the compliance requirements and potential costs for the small number of SEC-registered advisers that do have custody of client assets. In order to alleviate any undue burden on these small advisers, it may be beneficial to provide additional clarification or simplification of the rules. This would help ensure that the proposed regulations are not disproportionately burdensome for smaller market participants, while still upholding the investor protections that the SEC aims to achieve. Lastly, I would like to commend the SEC on the economic analysis carried out in relation to the proposed rule. The quantitative and qualitative assessments provided insight into the potential benefits and costs associated with the regulatory changes. However, I want to highlight the importance of ongoing review and reevaluation of the economic effects, particularly as market practices and technologies evolve. Considering the rapid pace of digital asset innovation and market dynamics, the SEC should remain vigilant in monitoring the effectiveness and efficiency of the proposed rules. This will enable the SEC to adapt and respond to new challenges and opportunities that may arise in the future. In conclusion, I appreciate the SEC's dedication to investor protection and its efforts to enhance the safeguarding of advisory client assets. However, it is important to address the concerns raised to ensure a fair and robust regulatory framework that promotes innovation, while providing adequate protections for investors. Thank you for considering my comments. I trust that the SEC will carefully review all public comments and make the necessary adjustments to ensure the proposed rule effectively achieves its intended objectives. Should you require any further information or clarification, please do not hesitate to contact me. Sincerely, Nathan