SEC to intensify scrutiny on U.S. brokers dealing in crypto
- U.S. broker-dealers and investment advisers dealing in cryptocurrency will face increased scrutiny, as per the U.S. SEC’s Division of Examinations.
- The SEC will concentrate its efforts on SEC-registered investment firms that provide or advise on cryptocurrencies.
The Securities and Exchange Commission (SEC) of the United States issued its annual examination priorities on how it will keep track of emerging risks, and one highlight was the handling of crypto assets.
According to the annual examination priorities announced on 7 February by the Securities and Exchange Commission’s Division of Examinations, U.S. broker-dealers and investment advisers dealing in cryptocurrency will face increased scrutiny this year.
How will the SEC move ahead?
The agency will concentrate its efforts on SEC-registered investment firms that provide or advise on cryptocurrencies. Moreover, it will ensure that the firms follow their respective standards of care when making recommendations, referrals, or providing investment advice.
According to SEC Chair Gary Gensler, these examination division priorities aim to protect investors in a time of expanding markets and evolving technologies. Most cryptocurrencies, according to Gensler, are securities that must be registered.
The annual priorities differ from those of last year, which included a shorter section on cryptocurrency, as well as “custody arrangements” for digital assets. The SEC has recently questioned registered investment advisers about whether they follow custody rules.
Earlier on 7 February, the SEC warned investors to be cautious of the cryptocurrency they may include in their self-administered retirement accounts.
Richard R. Best, Director, Division of Examinations, said:
“Our examination program continues moving forward and remains committed to furthering investor protection through high-quality examinations and staying abreast of the latest industry trends and emerging risks to investors and the markets.”
The Division of Examinations will undertake examinations of broker-dealers and RIAs that use emerging financial technologies or new practices, such as technological and online solutions, to meet compliance and marketing requirements and to service investor accounts.
Registrant examinations will focus on the offer, sale, recommendation, or advice regarding trading in crypto or crypto-related assets, as well as whether the firms:
- Met and abided by their respective standards of care when making recommendations, referrals, or providing financial advice
- Regularly assessed, updated, and improved their adherence, disclosure, and risk management practices
