Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on Safeguarding Advisory Client Assets. While I appreciate the aim to enhance investor protections and address existing gaps in the custodial rule, I believe there are a few areas that require further consideration. One area that requires more attention is the scope of the rule. The proposed expansion of coverage to include a broader range of investments is commendable, but it is essential to ensure that the definition of assets is comprehensive and adaptable to evolving markets and emerging technologies. In particular, the proposed inclusion of crypto assets must be considered in relation to international standards and best practices. It is important to align with global approaches to effectively safeguard client assets in an increasingly interconnected financial landscape. Furthermore, the proposal raises the challenge of demonstrating exclusive control over client assets. While I understand the need to address this issue, it is vital to examine international frameworks and guidance on custody practices. By considering these standards, the Securities and Exchange Commission (SEC) can ensure that the proposed rules not only align with domestic practices but also maintain international coherence, facilitating cross-border transactions and promoting global investor confidence. Additionally, in the section addressing assets unable to be maintained with a qualified custodian, the emphasis on enhanced recordkeeping, separation of duties, and regular reviews is commendable. However, I encourage the SEC to explore international models that have successfully addressed similar challenges. It is essential to strike a balance between effective safeguarding of client assets and operational efficiency, taking into account global best practices that have been tried and tested. Moreover, the proposed rule stresses the need to segregate client assets. While exceptions are provided for specific situations, it is crucial to prioritize the protection of client assets and ensure consistency with other regulatory frameworks. To achieve this, the SEC should consider aligning the requirements with relevant international standards, thereby promoting harmonization and avoiding unnecessary regulatory burdens. Lastly, I would like to express my concern regarding the inadequate consideration of international standards in the economic analysis. As the financial industry becomes increasingly globalized, it is essential for the SEC to take into account the impact of proposed regulations on international market participants and their ability to operate effectively. By harmonizing regulatory requirements with international standards, the SEC can enhance investor protection while facilitating cross-border capital flows and business operations. In conclusion, the proposed rule on Safeguarded Advisory Client Assets represents an important step towards enhancing investor protections and addressing gaps in custody practices. However, it is crucial to consider international standards and best practices to ensure coherence with global frameworks. By doing so, the SEC can effectively safeguard client assets, promote investor confidence, and facilitate the efficient functioning of international markets. Thank you for considering my concerns and ensuring that the final rule takes into account international standards and practices. Sincerely, Daniel Pitstock Sent with Proton Mail secure email.