The SEC’s Division of Examinations has outlined its 2023 examination priorities which reflected emerging technologies and crypto assets. The examination priorities is an annual publication to provide insights into the Division’s risk-based approach, present potential risks to investors, and the standards of the U.S. capital markets.
The published priorities showed that “the Division will conduct examinations of broker-dealers and RIAs (Registered Investment Advisors) 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”.
Firms will be examined focusing on offers, sales, recommendations of, or any advice regarding crypto trades or assets in that class. The firms will also be examined to ensure the set standards are met and followed. The standards are to be followed while “making recommendations, referrals, or providing investment advice; and routinely reviewed, updated, and enhanced their compliance, disclosure, and risk management practices.”
According to the SEC chair, Gary Gensler, protecting investors and ensuring compliance with the SEC is the aim of the Division. “In a time of growing markets, evolving technologies, and new forms of risk, our Division of Examinations continues to protect investors. In executing against the 2023 priorities, the Division will help ensure compliance with the federal securities laws and rules“, the SEC chair said.
Division of Examinations’ Director Richard R. Best in his statement on the published examination priorities agreed with the SEC chair on compliance with “the new SEC rules applicable to investment advisers and investment companies as well as continuing our focus on emerging issues and rules aimed at protecting retail investors”. The examination program is committed to investor protection through high-quality examination and updating with industry trends, the Director added.
The SEC in 2022 made a similar announcement but now emphasized standards and practices by brokers not just their consideration of unique risks.
Before the examination priorities release, the SEC reportedly launched an investigation on digital asset custody offered without proper qualifications.
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