Oct. 22, 2023
Docket Number, for reference: xxxxx] Dear Securities and Exchange Commission, I write to express my concerns and reservations regarding the proposed rule on "Safeguarding Advisory Client Assets" (Docket No: xxxxx). While I acknowledge the importance of enhancing investor protections and addressing gaps in the custody rule, I believe that certain aspects of the proposed rule may require further clarity, consideration, and revision. One key area of concern is the definition and treatment of digital assets, specifically cryptocurrencies, within the proposed rule. The rapidly evolving nature of digital assets, built on blockchain technology, presents unique challenges which require precise and targeted regulatory guidance. However, the current proposal fails to provide the necessary clarity on what constitutes a digital asset, which may lead to confusion and potential misinterpretation. Furthermore, the vague language surrounding digital asset custody raises questions regarding regulatory acumen and understanding of the intricacies involved. Moreover, the proposed rule appears to be overly complex, displaying an unnecessary level of intricacy that could impede innovation rather than foster it. The multiple regulatory uncertainties, compounded by ambiguous terms, call into question the fairness and consistency of the proposal. These uncertainties may also contribute to increased compliance costs for investment advisers, burdening small entities and potentially stifling competition. Additionally, the proposed rule's lack of clarity and overreach raises concerns about privacy violations. The extensive regulatory oversight potentially infringes on the privacy rights of individuals and entities involved in the investment advisory sector. Furthermore, the burden of complying with overly intrusive reporting and recordkeeping requirements, without sufficient justification or clarity of purpose, could lead to an undue regulatory burden. To ensure effective, comprehensive, and transparent regulation, it is essential that the proposed rule undergo further revision and refinement. Notably, there is a need for clearer definitions, streamlined procedures, and improved coordination with existing regulations. Furthermore, transparency and public input should be prioritized to mitigate the risk of regulatory capture or exclusion of relevant perspectives. In the context of digital assets, it is vital to strike a balance between regulatory oversight, ensuring robust investor protection and fostering innovation within a rapidly evolving landscape. Vague definitions, punitive approaches, and unnecessary bureaucratic hurdles risk stifling industry growth and stifling technological advancements. Lastly, I urge the Securities and Exchange Commission to consider the potential unintended consequences of the proposed rule, particularly its impact on small businesses and entrepreneurs. Excessive paperwork, impractical deadlines, and burdensome administrative requirements disproportionately affect smaller entities and hinder economic growth. Furthermore, the lack of accountability and limited remedies may result in inadequate enforcement, compromising the very investor protections the rule seeks to enhance. In conclusion, I respectfully request that the Securities and Exchange Commission address the concerns highlighted above and undertake a comprehensive revision of the proposed rule on Safeguarding Advisory Client Assets (Docket No: xxxxx). This will not only ensure effective investor protection and oversight but also foster a conducive and fair regulatory environment for all stakeholders involved in the investment advisory industry. Thank you for considering my comments. Sincerely, Jesse Wuerthner