The Securities and Exchange Commission (SEC) has posted its annual list of examination priorities emanating from the SEC Division of Examinations. Last year’s list included Fintech and Innovation including Digital Assets, this year’s list includes Emerging Technologies and Crypto-Assets, so a slight change.
To quote the Division:
“The Division will conduct examinations of broker-dealers and RIAs that are using emerging financial technologies to review whether the unique risks these activities present were considered by the firms when designing their regulatory compliance programs. RIA and broker-dealer examinations will focus on firms that are, or claim to be, offering new products and services or employing new practices to assess whether operations and controls in place are consistent with disclosures made and the standard of conduct owed to investors and other regulatory obligations; advice and recommendations, including by algorithms, are consistent with investors’ investment strategies and the standard of conduct owed to such investors; and controls take into account the unique risks associated with such practices. Examinations of market participants engaged with crypto-assets will continue to review the custody arrangements for such assets and will assess the offer, sale, recommendation, advice, and trading of crypto-assets.”
While the change in wording may be little more than semantics, this year’s statement appears to lean more on the “risk” side of the relationship. This would be in line with the Gensler Commission which has focused more energy on investor protection aspects, and less so on enabling change and innovation.
