Last Updated on February 8, 2023 by Bitfinsider
The Division of Examinations at the Securities and Exchange Commission has designated “crypto-assets” and other cutting-edge technologies as one of its main priorities for this year.
The SEC said: “The division will conduct examinations of broker-dealers and RIAs that are using emerging financial technologies or employing new practices, including technological and on-line solutions to meet the demands of compliance and marketing and to service investor accounts.”
When making recommendations, referrals, or offering investment advice, companies dealing with digital assets will be examined to see if they “met and followed their respective standards of care.” They will also be checked to see if they routinely review their own compliance, disclosure, and risk management practices.
The exams division will also pay close attention to whether investment advisers have complied with a new marketing regulation that the commission put into place last year and bans the use of endorsements and recommendations in investment promotion. High-profile instances involving celebrity endorsements of digital assets have been prosecuted by the SEC.
Examinations of investment advisors’ adherence to their fiduciary duties and a review of cybersecurity policies by broker-dealers, investment advisers, and other registrants are other agenda items that may be relevant to businesses dealing with digital assets. The fiduciary component will cover things like how they handle asset custody, risk assessment, and conflict of interest management.
SEC Chair Gary Gensler stated: “In a time of growing markets, evolving technologies, and new forms of risk, our Division of Examinations continues to protect investors,” and further added that “In executing against the 2023 priorities, the division will help ensure compliance with the federal securities laws and rules.”
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