Oct. 31, 2023
Thomas Joseph Irvine, CA October 30, 2023 Securities and Exchange Commission 100 F Street NE Washington, DC 20549 Re: Public Comment on Proposed Rule: Safeguarding Advisory Client Assets Dear Sir/Madam, I am writing to provide a public comment on the proposed rule regarding the safeguarding of advisory client assets by investment advisers, as outlined in the Securities and Exchange Commission's (SEC) proposal titled "Safeguarding Advisory Client Assets." I appreciate the opportunity to contribute my concerns and express my perspective on this important matter. One significant concern I have with the proposed rule is the lack of clarity surrounding custody requirements for digital assets. As the digital asset market continues to evolve at a rapid pace, it is crucial for regulatory agencies to provide clear guidelines and requirements to ensure the proper safeguarding of client assets in this context. Unfortunately, the proposal falls short in offering specific guidance and fails to address the unique challenges associated with custody of digital assets. Digital assets, such as cryptocurrencies, present novel custody considerations that may require innovative solutions. The lack of clear guidelines creates uncertainty for market participants and hinders the industry's ability to navigate this evolving landscape. It is essential for the SEC to exercise regulatory clarity in this area, as digital assets represent a rapidly growing segment of the investment market. The SEC should consider adopting specific provisions that address the custody requirements for digital assets. By establishing clear guidelines, the agency can facilitate compliance, reduce regulatory uncertainty, and enhance investor protections. These provisions should take into account factors such as the secure storage, access controls, and independent verification of digital assets held in custody by investment advisers. Furthermore, the agency should collaborate with relevant stakeholders and technological experts to develop practical solutions that align with industry best practices. In addition, I urge the SEC to engage in an extended dialogue with the investment community and solicit input from industry participants to further refine these custody requirements. Collaboration and open communication with market participants will foster a more comprehensive and effective regulatory framework, thereby catering to the unique nature of digital asset custody. Moreover, it is essential to align the proposed rule with existing laws and regulations that govern digital assets. The SEC should consider the guidance previously provided in no-action letters and other official statements to ensure consistency and clarity throughout the regulatory framework. Harmonizing the proposed rule with existing legal precedents would alleviate confusion and promote regulatory certainty. Furthermore, I commend the SEC for considering a one-year transition period for advisers to comply with the new rule. Providing a reasonable timeframe for adjustment is crucial, as it allows investment advisers to adopt necessary changes, update their compliance systems, and ensure a smooth transition without incurring undue burdens. During this transition period, the SEC should focus on creating educational resources and conducting outreach programs to raise awareness and improve compliance with the new rule. By proactively engaging with investment advisers and effectively communicating regulatory expectations, the agency can foster a culture of compliance and ensure successful implementation of the rule. In conclusion, the SEC should prioritize providing clear guidelines for custody of digital assets in order to minimize uncertainty for market participants. By addressing this vital concern and collaborating closely with industry stakeholders, the agency can establish a robust framework that enhances investor protections while accommodating, rather than impeding, innovation in the digital asset space. Furthermore, I applaud the SEC's consideration of a reasonable transition period and encourage effective implementation through comprehensive educational initiatives. Thank you for considering my comments on the proposed rule. I trust that the SEC will carefully evaluate the concerns raised by various stakeholders during the public comment period and take appropriate action in delivering a final rule that provides clarity, avoids unnecessary burden, and ensures the highest level of investor protection. Sincerely, Thomas Joseph