Cryptocurrencies will be one of the examination priorities of the U.S. Securities and Exchange Commission (SEC) in 2019.
According to the SEC’s Office of Compliance Inspections and Examinations (OCIE), this will be done with a view of protecting retail investors in the nascent asset class. Among the market activities that the OCIE will monitor include the ‘offer and sale, trading, and management of digital assets’. In cases where the digital asset is classified as a security, the goal of the SEC’s compliance wing will be to ensure regulatory compliance. Going forward, market participants in the digital asset space can expect a high level of scrutiny from the OCIE:OCIE will take steps to identify market participants offering, selling, trading, and managing these products or considering or actively seeking to offer these products and then assess the extent of their activities. For firms actively engaged in the digital asset market, OCIE will conduct examinations focused on, among other things, portfolio management of digital assets, trading, safety of client funds and assets, pricing of client portfolios, compliance, and internal controls.
Per the OCIE, the areas being accorded examination priority have been chosen based on policy and an assessment of risks and various sector issues.Last Year Too
The inclusion of cryptocurrencies as an examination priority was also on the agenda of the OCIE in 2018. Then, the focus was more on ensuring the security of digital assets and enlightening investors on the risks of making such investments:Areas of focus will include, among other things, whether financial professionals maintain adequate controls and safeguards to protect these assets from theft or misappropriation, and whether financial professionals are providing investors with disclosure about the risks associated with these investments, including the risk of investment losses, liquidity risks, price volatility, and potential fraud. ...