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