The United States Securities and Exchange Commission (SEC) will have jurisdiction over cryptocurrency brokers and investment advisors this year, the financial watchdog announced in a statement on February 7.
The SEC’s Division of Examinations announced its objectives for 2023, stressing that brokers and advisors working in the cryptocurrency industry would need to exercise extreme caution when offering, selling or advising clients on digital assets.
The Division typically releases its examination priorities once a year in order to provide clarity on its risk-based methodology and highlight the areas it thinks might jeopardize investors’ interests and the stability of the American financial markets.
The SEC’s Division of Examinations chooses 5 areas to examine
The organization plans to focus on a number of major areas in 2023, including cryptocurrencies and other financial products.
The selection of the Division’s 2023 priorities includes five aspects, including New Investment Adviser and Investment Company Rules, RIAs to Private Funds, Retail Investors and Working Families, Environmental, Social, and Governance (ESG) Information Security and Operational Resiliency, and Emerging Technologies and Crypto-Assets.
It added that SEC-registered brokers and advisors will be thoroughly monitored to determine if they followed their “respective standards of care” while offering any services related to digital assets.
Moreover, the financial regulator will check to see if these organizations “routinely” examine and update their processes to make sure they adhere to compliance, transparency, and risk management policies.
SEC chair Gary Gensler emphasized in the statement that the Division of Examinations will continue to safeguard investors in an era of expanding markets, emerging technology, and new types of risk. He continued,
“In executing against the 2023 priorities, the Division will help ensure compliance with the federal securities laws and rules.”
Division of Examinations’ Director Richard R. Best stated that they will emphasize compliance with new SEC rules applicable to investment advisers and investment companies as well as continue their focus on emerging issues and rules aimed at protecting retail investors. He 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.”
However, the SEC stated that the disclosed priorities do not represent a full list of the division’s emphasis areas in its investigations, risk alerts, and outreach. Also, the scope of any investigation also includes a review of an entity’s history, operational processes, services, products offered, and other risk factors.
