New Year, New Rules: SEC Targets Crypto Advisers
This year, the Securities and Exchange Commission (SEC) has decided that it’s high time to put its magnifying glass on crypto brokers and investment advisers. In a statement from February 7, the SEC’s Division of Examinations laid out its priorities for the year ahead, hinting that those who dabble in cryptocurrencies better be on their toes—or risk facing some serious scrutiny.
Keeping Track: Standards of Care Under the Lens
As if navigating the wild world of crypto wasn’t tough enough, brokers and advisors now have to ensure they’re adhering to their “respective standards of care” when dealing in digital assets. Forget about the days of winging it; professionalism and transparency are the name of the game. Think of it as a vintage beer pong tournament where everyone needs to play fair, or risk being booted from the party.
Compliance, Compliance, Compliance!
In this new regulatory environment, regular check-ups are not just for your health; they’re a must for compliance too. The SEC will keep a watchful eye on whether investment firms routinely review and update their procedures. Are they keeping up with the times as financial practices evolve? Getting comfortable may be a dangerous game, as only those with robust compliance and risk management practices will thrive.
Learning from the Past: Insights from 2022
Interestingly, the SEC’s focus is shifting from the “emerging financial technologies” roadshow we saw in 2022 to a spotlight on the practices of brokers. In a world where every year feels like a new episode in a dystopian drama, it’s clear that the SEC is standing firm—saying, “We learned our lesson, and we’re here to make sure you do too!”
Aftermath of FTX: The Ripple Effect
The backdrop to all of this regulatory action is the fallout from the collapse of the crypto exchange FTX, a situation that has resonated through the financial community with a reverberating thud. The SEC is now intensely investigating registered investment advisers who might be offering digital asset custody services without the necessary qualifications. Yes, folks, qualifications matter—and it’s about time they got the spotlight!
Legal Obligations: Custody Services Under Fire
Let’s not forget that offering custody services for digital assets requires a certain level of qualification. By law, firms must comply with custodial safeguards as laid out in the Investment Advisers Act of 1940. Any potential slacker in this area might as well run through an open field waving a flag that says, “Audit Me!”
