SEC to increase inspection of firms offering crypto guidance
February 8, 2023 7:49 AM
After a recent warning from the SEC, registered crypto brokers and advisors may need to be extra careful this year when giving advice.
This year, the US Securities and Exchange Commission will be in charge of cryptocurrencies brokers and investment advisors who sell or give advice on cryptocurrencies.
The Securities and Exchange Commission's (SEC) Division of Examinations released a statement on February 7 outlining its priorities for 2023. This statement suggests that brokers and advisers who deal with crypto will need to be extra careful when offering, selling, or recommending digital assets.
The statement said that brokers and advisors who are registered with the SEC would be closely watched to see if they followed their "respective standards of care" when making recommendations, sending referrals, and giving investment advice.
The SEC will also check to see if these companies "routinely" check and update their procedures to make sure they meet "compliance, disclosure, and risk management standards."
This declaration was similar to the SEC's goals revealed in 2022, but it appears that the regulator is putting greater focus this year on broker standards of care and practices, rather than their evaluation of particular risks provided by "new financial technology" noted in 2022.
The latest news comes almost two weeks after a report said the SEC was looking into registered investment advisers who may be selling digital asset custody to their clients without being qualified.
Reuters says that the SEC's investigation has been going on for a few months, but it has become a top priority after the collapse of the cryptocurrency exchange FTX.
The Investment Advisers Act of 1940 says that businesses that offer custody services to clients must be licensed and follow the precautions for custody that it outlines.