SEC Issues Warning to Crypto Brokers and Advisors

The United States Securities and Exchange Commission (SEC) has issued a stern warning to crypto investment advisors and brokers via a statement by its Division of Examinations. According to the February 7 statement, the concerned parties must be careful in delivering their services this year.

SEC Promises to Increase Scrutiny

Per the announcement, SEC says it will keep the activities of all crypto-based brokers and advisors under close watch. The securities watchdog says that the aim is to ensure that they stay in line and follow their “respective standards of care.” That is when they offer, sell, or give advice to clients regarding digital assets.

Furthermore, the SEC says it will take it upon itself to check whether the entities make it their duty to regularly review and update their services in ways that will meet regulatory requirements.

Meanwhile,  it is worth noting that SEC’s priorities for 2023 did not entirely deviate from the priorities it set last year. In 2022, the watchdog focused more on the unique risks that come along with “emerging financial technologies.” However, the regulator may have upped its overwatch this year by laying more emphasis on standards of care and practices by brokers.

Interestingly,  the announcement comes barely two weeks after a Reuters report surfaced about the SEC looking into investment advisors that are offering custodial services without having the license to do so.  At the time, it was gathered that the investigation has been going on for several months. However, the collapse of the giant crypto exchange FTX quickly meant that the SEC needed to make the investigation an immediate priority.

For what it’s worth, the law stipulates that investment advisory firms must be qualified to offer custody services to clients. And in order to qualify,  they must first comply with the provisions set out in the Investment Advisers Act of 1940.