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SEC’s Examination Division Include Crypto in Its Priority Focus Area

By:
Sujha Sundararajan
Published: Mar 31, 2022, 10:32 GMT+00:00

The division will conduct examinations of broker-dealers and investment advisors that use cryptos on whether they consider risks and investor protection.

US Crypto

Key Insights:

  • US SEC adds crypto to its 2022 exam priorities.
  • The agency will examine risks associated with crypto and investor protection.
  • SEC examiners will arrange custody for crypto assets and evaluate any sales, advice, and crypto trading.

The U.S. financial regulator Securities and Exchange Commission (SEC) has included cryptos among its examination priorities in 2022.

Crypto Scrutiny by SEC

According to a report, the SEC’s Examination Division will monitor broker-dealers and investment advisors that use crypto, whether they consider risks while framing their regulatory compliance programs.

The examination will focus on crypto-related firms that offer products and services and include new practices such as fractional shares and digital engagement practices.

The department will examine whether,

  • These companies are consistent in operations and controls with proper disclosures provided to investors.
  • Advice, recommendations made by investment advisors are consistent with investors’ investment strategies and the standard of conduct.
  • Controls take into account the risks associated with crypto practices.

What It Means

The Examination Division of SEC monitors risks and investor protection of cryptocurrency-based securities for U.S. retail investors.

While the SEC has listed these items in previous annual priority lists, Wednesday’s publication provided a glimpse at how the division evaluates areas that have emerged as priorities, from climate and crypto to broker-dealers’ procedures.

Previous priority lists only mentioned initial coin offerings and the risks digital assets might pose to retail investors. In 2020, the regulator addressed investment suitability, trading practices, fund safety, and pricing.

Per the release, examiners from the regulator will focus on crypto custody arrangements and access sales, recommendations, advice, and trading of digital assets such as Bitcoin (BTC) and Ethereum (ETH).

About the Author

Sujha Sundararajan is a writer-journalist with 7+ years of experience in Blockchain, Cryptocurrency and in general, FinTech news reporting. Her articles have featured in multiple journals such as CoinDesk, Protos, Bitcoin Magazine, CCN, Asia Blockchain Review, BeInCrypto and EconoTimes to name a few. She holds a Master’s in Journalism from the Indian Institute of Journalism and New Media and is also an accomplished Indian classical singer.

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