The Securities and Exchange Commission (SEC) identified crypto assets as a high-risk area for market participants to examine this year. “In this moment of increasing market volatility, our efforts have been tailored to focus on emerging concerns, such as crypto assets,” the SEC Division of Examinations official said.
Cryptocurrencies are one of the SEC’s top priorities for examination:
The Securities and Exchange Commission Division of Examinations released its yearly examination priorities on Wednesday. This year’s study highlights cryptocurrency as one of the top objectives.
The SEC’s National Exam Program is overseen by the Division of Examinations, whose “goal is to protect investors, guarantee market integrity, and facilitate responsible capital formation through risk-focused initiatives,” according to its website.
According to SEC Chairman Gary Gensler, the examination priorities identify significant risk areas that registrants, such as investment advisors, broker-dealers, self-regulatory organizations, and clearing companies, must “address, manage, and mitigate with diligence.”
Acting Director of the Division of Examinations Richard Best had this to say: Our objectives are geared to focus on emergent challenges, such as crypto assets and rising information security risks, as well as key issues that have been part of the SEC’s mandate for decades, such as protecting retail investors, in this time of increased market volatility.
One of the five “major priority areas” listed in the Examination Priorities report is “emerging technologies and crypto-assets.” Pension funds, environmental, social, and governance (ESG) investment, norms of behavior, data security, and operational resiliency are among the others.
“The Division will undertake examinations of broker-dealers and RIAs [registered investment advisors] that are leveraging innovative financial technology to examine whether the businesses recognized the specific risks these activities bring when building their regulatory compliance processes,” the SEC said. The securities regulator went on to say:
Examining market players who deal in crypto assets will continue to look into the custody arrangements for such assets and the offer, sale, recommendation, advice, and trading of such assets.
According to the paper, “the Division will also undertake audits of mutual funds and ETFs [exchange-traded funds] that offer exposure to crypto assets to examine, among other things, compliance, liquidity, and operational controls surrounding portfolio management and market risk.”
