Crypto brokers and investment advisors who offer or advise on cryptocurrencies will be brought under the purview of the United States securities watchdog this year.
A February 7 statement from the Securities and Exchange Commission’s (SEC) Examination Division outlined its priorities for 2023, advising brokers and advisors dealing with crypto to be more careful when offering, selling or recommending digital assets.
It states that SEC-registered brokers and advisors will be closely monitored to see if they follow “standards of care” when making recommendations, referrals and giving investment advice.
Today we are announcing the Examination Division’s priorities for 2023. The Division publishes examination priorities each year to provide insight into a risk-based approach.
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– US Securities and Exchange Commission (@SECGov) February 7, 2023
The SEC will also examine whether these entities “regularly” review and update their procedures to ensure they meet “compliance, disclosure and risk management practices.”
This announcement is similar to the SEC’s priorities released in 2022, but this year, the regulator is more focused on the standards of care and practice by brokers, rather than considering the unique risks presented by the “emerging financial technology” highlighted in 2022.
The latest statement comes nearly two weeks after reports said the SEC was investigating a registered investment adviser who may have offered custody of digital assets to clients without proper qualifications.
related: SEC leaked personal information of crypto miners during investigation: Report
The SEC investigation has been reported for months but is now at the top of the priority list following the collapse of crypto exchange FTX, according to a report from Reuters.
By law, investment advisory firms must be qualified to offer custodial services to clients and comply with custodial safeguards set forth in the Investment Advisers Act of 1940.