The Division of Examinations of the U.S. Securities and Exchange Commission (SEC) has said it will focus on emerging technologies and crypto-assets in its 2023 release.
The division will examine broker-dealers and Registered Investment Advisers (RIAs) that use fintech under this category. This includes implementing new technologies for handling investor accounts.
SEC Underlines Standard of Care
The release stated, “Examinations of registrants will focus on the offer, sale, recommendation of, or advice regarding trading in crypto or crypto-related assets.”
The agency division aims to ensure that the RIA meets and adheres to its underlined standards of care. Therefore, the companies will be under the radar while making recommendations, making referrals, or giving financial advice. It will also be scanned if the firm periodically reviewed, updated, and improved its compliance, disclosure, and risk management policies.
A separate list of registered investment advisers (RIAs) written policies and fiduciary obligations has been made public. The regulator aims to ensure compliance with the rules.
SEC Chair Gary Gensler said, “In executing against the 2023 priorities, the Division will help ensure compliance with the federal securities laws and rules.”
Securities Watchdog Reaffirms Crypto Risks
Gensler has frequently voiced concerns regarding investing in private crypto assets. The chairman has often avoided commenting on specific projects but has referred to many cryptocurrency assets as securities.
He recently claimed that cryptocurrencies are an extremely speculative and volatile investment. The head of the agency also warned investors to be wary of “too good to be true” cryptocurrency returns. He pointed at lending platforms offering handsome returns amid widespread market weakness.
The division had targeted “finfluencers” while concentrating on related issues in 2022. The division also evaluated during the year if current operations and controls are in line with stated disclosures. They also have to be in line with the level of conduct expected for investors’ safety.
It also examined whether recommendations and guidance, including those made by algorithms, are consistent with the rules. In its earlier version as well, the agency made an effort to consider the particular risks associated with emerging technologies.
In a separate release this week, the SEC stated that self-directed IRAs may allow investments in “crypto assets,” such as “virtual currencies, coins, and tokens.” The agency reiterated the possibility that cryptocurrency assets could be securities sold without SEC registration or a legitimate exemption from registration.
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