- U.S. broker-dealers and investment advisors dealing with cryptocurrencies will face increased scrutiny, according to the U.S. SEC Review Division.
- The SEC will focus its efforts on SEC-registered investment firms that provide or advise on cryptocurrencies.
The U.S. Securities and Exchange Commission (SEC) has released its annual review priorities for how it will track emerging risks, and one of the highlights has been the handling of crypto assets.
In line with the annual exam priorities announced on Feb. 7 by the Securities and Exchange Commission Examining Division, U.S. broker-dealers and investment advisors dealing with cryptocurrencies will face increased scrutiny this year.
How will the SEC move forward?
The agency will focus its efforts on SEC-registered investment firms that provide or advise on cryptocurrencies. In addition, it will ensure that firms adhere to appropriate service standards when providing advice, direction or investment advice.
According to SEC Chairman Gary Gensler, these due diligence priorities are designed to protect investors in times of expanding markets and advancing technology. Most cryptocurrencies, according to Gensler, are securities that must be registered.
The year’s priorities differ from last year’s, which included a shorter section on cryptocurrencies as well as “custodial arrangements” for digital assets. The SEC recently polled registered investment advisers about whether they are complying with custody rules.
Earlier, on Feb. 7, the SEC warned investors to be careful about the cryptocurrencies they might include in their self-managed retirement accounts.
The Examination Department will conduct reviews of broker-dealers and RIAs that use emerging fintech or new methods such as technology and online solutions to meet compliance and marketing requirements and to serve investor accounts.
Registrant screening will focus on offering, selling, recommending or advising on the trading of cryptocurrencies or crypto-related assets, and whether firms are:
- Observed and adhered to appropriate standards of service when providing advice, referrals, or providing financial advice.
- Regularly assessed, updated and improved our compliance, disclosure and risk management practices.