The Securities and Exchange Commission (SEC), Division of Examinations, has posted its 2024 examination priorities, including digital assets and Fintech items.
The Division of Enforcement noted that last year, it established specialized teams within the various examination programs, including “crypto assets, financial technology [Fintech], such as artificial intelligence, and cybersecurity, among others.”
The Division reports that it continues to see the proliferation of crypto and associated products. They also mention Fintech, specifically “automated investment advice” or Robo-advisors.
The Division said it will focus on Broker-Dealers that are offering these products and will initiate examinations of registrants – when deemed necessary.
To quote the document:
“Examinations of registrants will focus on the offer, sale, recommendation of, advice regarding, trading in, and other activities in crypto assets or related products. Specifically, reviewing whether such registrants involved with crypto assets: (1) meet and follow their respective standards of conduct when recommending or advising customers and clients regarding crypto assets, with a focus on an initial and ongoing understanding of the products, to the extent required by the applicable standard of conduct, particularly when the investors are retail-based (including older investors) and investments involve retirement assets; and (2) routinely review, update, and enhance their compliance practices (including crypto asset wallet reviews, custody practices, Bank Secrecy Act (BSA) compliance reviews, and valuation procedures), risk disclosures, and operational resiliency practices (i.e., data integrity and business continuity plans), if required. With respect to crypto assets that are funds or securities, the Division will consider whether advisers are complying with the custody requirements under the Advisers Act (Rule 206(4)-2). In addition, the Division will assess whether any technological risks associated with the use of blockchain and distributed ledger technology have been addressed, including whether compliance policies and procedures are reasonably designed, accurate disclosures are made and the risks pertaining to the security of crypto asset securities are addressed, if required by applicable law.”
The examination priorities are fairly congruent to the priorities laid out in the 2023 document.
