Oct. 31, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule titled "Safeguarding Advisory Client Assets." While I understand the intentions behind this rule to enhance investor protections and address gaps in the custody rule, I have several concerns that I would like to address. One area of particular concern is the lack of clarity in the definition of digital assets. The proposal fails to provide clear guidance on what constitutes a digital asset, leading to confusion and potential misinterpretation. This lack of clarity could hinder the ability of investment advisers to effectively safeguard client assets, especially in the rapidly evolving landscape of digital assets, such as cryptocurrencies. Digital assets, including cryptocurrencies, have emerged as transformative financial instruments built on blockchain technology. However, due to their unique characteristics and regulatory uncertainties, ensuring their proper safeguarding becomes a critical challenge. It is imperative that the proposed rule provides specific and comprehensive guidance on the treatment and safeguarding of digital assets to protect both investors and investment advisers. Furthermore, while the proposed rule addresses the application of the rules to crypto assets, it lacks nuance when it comes to differentiating between the various types of digital assets. Different digital assets have varying degrees of risk and should be treated differently when it comes to custody and safeguarding requirements. Taking a one-size-fits-all approach may not only be impractical but could also stifle innovative technologies and hinder the growth of the digital asset market. In addition to the lack of clarity regarding digital assets, I am also concerned about the potential burdens placed on investment advisers by the proposal. The proposed rule introduces new compliance requirements and recordkeeping obligations, which could impose significant costs on advisers and potentially deter small businesses from entering the advisory industry. It is crucial to strike the right balance between enhancing investor protections and ensuring a regulatory framework that is accessible to both large and small advisers. While I appreciate the efforts made by the SEC to consider the economic impact of the proposed rule, I urge the Commission to conduct a thorough analysis of the potential costs and benefits, particularly for small advisers. The estimates provided in the economic analysis may not accurately reflect the realities small advisers may face, such as limited resources and differing business models. It is important to ensure that the proposed rule does not disproportionately burden small advisers or hinder their ability to provide valuable services to clients. In conclusion, I believe that the SEC's proposal to enhance the safeguarding of client assets is a step in the right direction. However, it is crucial that the proposal provides clear and comprehensive guidance on the treatment of digital assets and considers the unique challenges and opportunities they present. Furthermore, the SEC should ensure that the proposed rule strikes the right balance between investor protection and the burden placed on investment advisers, particularly small businesses. Thank you for considering my concerns and comments on this important matter. SincerelySincerely 13