Oct. 28, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets." While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I have concerns regarding certain aspects of the proposed rule and its potential negative impact on tokenized supply chain solutions and digital assets. Firstly, the proposed rule's scope includes a broader range of investments held in a client's account. While this is understandable to ensure greater safeguarding of client assets, it may inadvertently limit the adoption and efficiency of tokenized supply chain solutions. These solutions leverage blockchain technology, allowing for increased transparency and efficiency in supply chain management. By defining assets strictly within the traditional framework, the proposed rule fails to account for the innovations brought about by digital assets and their potential benefits in supply chain management. Moreover, the rule's discussion on how investment advisers should safeguard crypto assets raises concerns about regulatory uncertainties. The rapid growth of digital assets, such as cryptocurrencies, has transformed the financial landscape. However, the lack of clear and definitive regulations creates challenges for both investors and investment advisers. It is crucial for the SEC to foster an environment that encourages innovation in the digital asset space while ensuring investor protection. Additionally, the proposed rule addresses how advisers can safeguard assets that cannot be maintained with a qualified custodian. While the rule acknowledges the need for enhanced recordkeeping, separation of duties, and regular reviews, it is important to strike a balance between regulatory oversight and allowing flexibility for different business models. Tokenized supply chain solutions, for instance, often require specialized custody arrangements, and overly strict requirements may hinder their development and adoption. Furthermore, the proposed rule's amendments to the surprise examination requirement are commendable in reducing the risk of asset loss and enhancing investor protections. However, it is essential to provide reasonable exceptions for advisers with discretionary authority over client assets and those with custody solely due to standing letters of authorization (SLOA). Such exceptions would ensure that the rule does not unnecessarily burden investment advisers engaged in low-risk activities. In terms of the economic analysis, it is crucial to consider the potential impact of the proposed rule on capital formation and competition. While the rule aims to enhance investor protections, its implementation should not impede competition or hinder capital formation within the advisory industry. Striking the right balance between investor protection and market efficiency is essential for the overall health of the financial ecosystem. In conclusion, I urge the SEC to carefully consider the potential negative impact that the proposed rule may have on tokenized supply chain solutions and digital assets. It is essential to adopt a forward-thinking approach that not only enhances investor protections but also encourages innovation and the broader adoption of new technologies. By striking the right balance, we can ensure both transparency and efficiency within the advisory industry. Thank you for considering my input on this matter. Sincerely, ?ukasz Niesyto