Oct. 31, 2023
[Your Address] [City, State, Zip] [Email Address] [Date] Securities and Exchange Commission 100 F Street, NE Washington, D.C. 20549-0212 Attention: File No. S7-30-20 Re: Public Comment on Proposed Rule: Safeguarding Advisory Client Assets Dear Sir/Madam, I am writing to provide my comments on the proposed rule, Safeguarding Advisory Client Assets, which aims to enhance investor protections and address gaps in the custody rule. I appreciate the Securities and Exchange Commission's (SEC) efforts to strengthen the safeguarding of client assets, but I have certain concerns with the current proposal that I would like to address. One significant issue I have observed in the proposal is the lack of clarity on the definition of digital assets. The rapidly evolving landscape of digital assets necessitates clear guidance to avoid confusion and potential misinterpretation. As a concerned investor, I urge the SEC to provide a precise definition of digital assets, including both cryptocurrencies and any other emerging assets of similar nature. Clear definitions will not only prevent arbitrary regulatory classifications but also instill greater confidence and certainty in the market. Furthermore, I would like to emphasize the importance of striking a balance between investor protections and compliance costs. While protecting investor assets is crucial, it is equally important to evaluate the potential burden these proposed rule amendments might impose on investment advisers. I encourage the SEC to consider the economic impact on small and medium-sized advisory firms, as they may not have the same resources as larger firms to comply with stringent custodial requirements. Flexibility in implementation will ensure that smaller market participants are not disproportionately affected, promoting fair and equal competition within the advisory industry. In terms of recordkeeping requirements, I commend the SEC for proposing amendments to Rule 204-2 that further enhance oversight and investor protection. Nevertheless, it is vital to continuously assess the efficiency and relevance of these recordkeeping obligations to avoid unnecessary bureaucratic complexities. Streamlined and targeted recordkeeping requirements will assist both the SEC and advisers in ensuring transparency while preventing any excessive administrative burdens that may hinder the efficient functioning and growth of the industry. Moreover, it is crucial to acknowledge the unique challenges posed by certain assets that cannot be maintained with a qualified custodian. I support the proposed requirement of enhanced recordkeeping, separation of duties, and regular reviews in such cases. However, given the potential complexity surrounding custody of these assets, the SEC should consider providing additional guidance and flexibility to advisers. The inclusion of industry best practices in the rule, rather than a rigid framework, can ensure effective safeguards for these assets while allowing for adaptability to rapidly evolving technologies and blockchain-based solutions. Lastly, I would like to highlight the necessity of developing communication and education initiatives for both advisers and investors. The proposed requirement for advisers to notify clients in writing when opening an account with a custodian is a step in the right direction. However, the SEC should consider expanding this requirement to include ongoing and explicit communication regarding custody arrangements. Emphasizing the importance of understanding custodial safeguards will empower investors and enable them to make informed decisions and evaluate the security of their assets effectively. In conclusion, I appreciate the opportunity to provide my comments on the proposed rule. It is paramount that any amendments made to the custodial rule strike a balance between safeguarding investor assets and avoiding excessive hurdles for investment advisers. Further clarity on the definition of digital assets, consideration for the unique challenges posed by certain assets, streamlining recordkeeping obligations, and improving communication and education initiatives will strengthen investor protections and foster a dynamic and vibrant investment advisory industry. Thank you for your attention to these concerns. Please consider my comments when formulating the final rule. If you require any additional information or would like further elaboration on any of the points raised, please do not hesitate to contact me. I look forward to witnessing a pragmatic and balanced approach towards the safeguarding of advisory client assets. Sincerely, Thomas Joseph