Oct. 31, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets" that aims to enhance investor protections and address gaps in the custody rule. While I appreciate the SEC's efforts to ensure the safety of client assets, I believe there are certain aspects of the rule that require further clarity and consideration, particularly in relation to the definition of digital assets. One of my primary concerns is the lack of clarity provided in the proposal regarding the definition of digital assets. In an era where digital assets, such as cryptocurrencies, have gained significant prominence and are transforming the finance industry, it is crucial to have clear guidelines in place to ensure proper regulation and compliance. Without clear definitions, there is a risk of confusion and potential misinterpretation, which may hinder the effective safeguarding of client assets. Moreover, as the proposal addresses the application of the rule to crypto assets, it is essential to consider their unique characteristics and challenges. The rapid evolution and technological advancements in the blockchain and cryptocurrency space require regulations that are flexible and adaptable. The Howey test, which was established in 1946, and the laws from 1932 may not fully encompass the complexities of digital assets and smart contracts today, such as hex, pulsechain, and pulsex ecosystem. In order to provide effective investor protection, it is crucial that regulatory authorities keep pace with technological advancements and provide clear guidance specifically tailored to digital assets. This can help foster innovation and technology adoption while ensuring the safety and integrity of the financial system. Additionally, I would like to express my concerns about the potential impact of the proposed rule amendments on small entities, such as small investment advisers. While I understand the importance of enhancing investor protections, it is crucial to strike a balance that considers the compliance burden on small entities. The projected compliance requirements, particularly the reporting, compliance, and recordkeeping requirements, may impose significant costs on small advisers, potentially hampering their ability to serve clients effectively. I encourage the SEC to carefully assess the economic impact of the proposed rule on small entities and consider whether there are any feasible alternatives that mitigate the compliance burden while still achieving the desired objectives of investor protection. In conclusion, I believe that further clarification on the definition of digital assets in the proposed rule is necessary to provide certainty and prevent potential misinterpretation. It is important for the SEC to consider the evolving landscape of digital assets and smart contracts, and ensure the proposed regulations are adaptable to these technological advancements. Additionally, the potential impact on small entities should be thoroughly assessed, and reasonable alternatives should be explored to minimize compliance costs and preserve their ability to serve clients effectively. Thank you for considering my concerns. I look forward to a transparent, inclusive, and effective regulatory framework that both safeguards investor interests and encourages innovation in the financial industry. Sincerely, Gary Fisk Thanks Gary Fisk Cleats Manufacturing Co., Inc. 1701 S. Kostner Ave. Chicago, IL 60623 773-542-0453 Office 773-542-0487 Fax 708-638-0025 Cell www.cleatsmfg.com