U.S. securities watchdog, the Securities and Exchange Commission (SEC), plans to scrutinize crypto brokers and investment advisors that provide or offer guidance on cryptocurrencies in the coming year.
The SEC’s Division of Examinations outlined its 2023 priorities, requiring brokers and advisers in crypto to exercise caution in offering, selling, and recommending digital assets.
SEC Chair Gary Gensler stated that despite the expanding markets, changing technologies, and emerging risks, the Division of Examinations remains committed to safeguarding investors. The Division will aid in following the federal securities laws and regulations as it implements the 2023 priorities.
Additionally, Richard R. Best, head of the Division of Examinations, stated that the chosen priorities display a “transforming environment” and the dangers that accompany these changes. He mentioned that by staying up-to-date with industry advancements, the SEC would be in a better position to recognize potential hazards for both investors and the markets.
SEC’s 2023 Crypto Broker-Adviser Examination Priorities
The SEC will monitor its registered brokers and advisers. They must comply with standards of care in recommendations, referrals, and investment advice. According to the February 7th tweet:
Today we announced the Division of Examinations 2023 priorities. The Division publishes its examination priorities annually to provide insights into its risk-based approach.
The SEC will examine if entities regularly review and update their procedures for compliance, disclosure, and risk management practices.
Additionally, the SEC released similar priorities as 2022, with an increased focus on standards of care and practices by brokers. The regulator prioritizes broker behavior rather than the unique risks presented by emerging financial technologies, as highlighted in 2022.
Moreover, the SEC recently stated their investigation into registered investment advisers offering digital asset custody without proper qualifications. It comes nearly two weeks after a report on the matter.
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SEC prioritizes investigation into registered investment advisers after FTX collapse, according to previous reports. The research has been ongoing for months. Furthermore, Investment advisory firms must meet legal requirements and follow 1940 Act custodial safeguards to offer custody services.
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