Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets." While the rule aims to enhance investor protections and address gaps in the custody rule, I believe there are certain areas that require further clarity and consideration to ensure the effective safeguarding of client assets. Specifically, my concerns revolve around the absence of regulatory clarity for security tokens and the challenges posed by digital assets or cryptocurrencies. Firstly, the proposal does not provide clear regulatory guidelines for security tokens. With the rise of digital assets and blockchain technology, security tokens have emerged as a new class of assets. However, there is a lack of regulatory clarity surrounding these tokens, leading to uncertainty and hindering investor protection. Without clear guidelines, investment advisers may be unsure of how to effectively safeguard these assets and ensure compliance with the proposed rule. The SEC has an opportunity to lead and set clear parameters when it comes to security tokens. By providing guidance on how these tokens should be treated under the proposed rule, the SEC can enhance investor protections and enable investment advisers to navigate this rapidly evolving landscape with confidence. Clear regulatory guidelines will not only foster growth and innovation in the industry but also safeguard the interests of investors. Secondly, digital assets, such as cryptocurrencies, have transformed the financial landscape. However, they also present unique challenges when it comes to custody and safeguarding. The proposal should address these challenges more comprehensively to promote investor protection. Digital assets often exist in an intangible form, stored electronically on blockchain networks. These assets require innovative custody solutions that go beyond traditional custodians. Investment advisers need to have a clear understanding of how they can effectively demonstrate exclusive control over these assets and implement appropriate safeguards to protect their clients. Without clear guidance on how digital assets should be treated under the proposed rule, investment advisers may struggle to navigate this complex terrain. Regulatory uncertainties could hinder the growth of digital assets and deter investment advisers from offering these innovative investment opportunities to their clients. Therefore, it is vital that the SEC provides specific provisions and guidance on how to safeguard and custody digital assets to foster investor protection while supporting innovation in the industry. In conclusion, I believe that the proposed rule "Safeguarding Advisory Client Assets" should incorporate clear regulatory guidelines for security tokens and address the challenges posed by digital assets. By doing so, the SEC can enhance investor protections and create an environment that encourages the responsible and innovative use of digital assets within the investment advisory industry. I appreciate the opportunity to provide my comments and trust that you will consider these concerns in the formulation of the final rule. Thank you for your attention to this important matter. Sincerely, Andy