Oct. 28, 2023
A Concerned U.S. Citizen Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets." While I believe that the aim of enhancing investor protections and addressing gaps in the custody rule is commendable, there are areas of the proposal that require further clarification and attention. One of my foremost concerns relates to the lack of regulatory clarity for non-fungible tokens (NFTs). In recent years, NFTs have gained significant prominence and have become a popular investment option. However, the proposal fails to provide clear guidelines on how investment advisers should handle and safeguard NFT assets. This lack of clarity creates uncertainty and potential legal challenges for advisers operating in the digital asset space. Digital assets, including cryptocurrencies, have revolutionized the financial landscape and have the potential to offer new investment opportunities. However, the regulatory uncertainties surrounding these assets pose significant challenges. The proposal acknowledges the application of the rule to crypto assets but does not provide sufficient guidance on how investment advisers can effectively demonstrate exclusive control over these assets. Without clear guidelines, advisers may struggle to comply with regulatory requirements, potentially hindering the growth and development of the digital asset market. Furthermore, the economic analysis provided in the proposal acknowledges that the proposed rule will result in compliance costs for investment advisers. While I understand the need for measures to enhance investor protections, it is crucial to strike a balance between these protections and the burden placed on industry participants. The proposal must ensure that the compliance costs do not disproportionately affect smaller advisers or hinder their ability to effectively protect client assets. Additionally, the proposed rule includes new collection of information requirements, leading to increased paperwork burdens on investment advisers. The estimated total annual hour burden and external cost burden for advisers subject to the proposed rule are substantial. It is essential to carefully evaluate both the necessity and efficacy of these additional requirements to minimize unnecessary burdens on investment advisers. Considering the rapidly evolving nature of the digital asset industry, I believe it is imperative for the Securities and Exchange Commission to engage in ongoing dialogue with industry participants and stakeholders to develop clear and practical guidelines. This will not only provide regulatory certainty but also enhance investor protection and foster innovation in this important sector. In conclusion, while I appreciate the SEC's efforts to strengthen investor protections through the proposed rule "Safeguarding Advisory Client Assets," I urge the commission to address the concerns raised regarding the lack of regulatory clarity for non-fungible tokens and digital assets. It is crucial to strike a balance between investor protections and the burden placed on investment advisers, particularly smaller entities, to ensure the continued growth and development of the industry. Thank you for considering my concerns. I strongly encourage the Securities and Exchange Commission to take them into careful consideration during the rulemaking process. Sincerely, A Concerned U.S. Citizen