Crypto assets have been listed by the Securities and Exchange Commission as an exam priority this year for market participants. “In this time of heightened market volatility, our priorities are tailored to focus on emerging issues, such as crypto assets,” said an official with the SEC Division of Examinations.
SEC Exam Priorities Crypto Assets
The Securities and Exchange Commission’s Division of Examinations published its annual examination priorities Wednesday. Cryptography is one of the most important priorities in this year’s report.
The Division of Examinations conducts the SEC’s National Exam Program, its website details, adding that its “mission is to protect investors, ensure market integrity and support responsible capital formation through risk-focused strategies.”
SEC Chairman Gary Gensler explained that the examination priorities identify key risk areas that the SEC expects registrants — including investment advisers, broker-dealers, self-regulatory organizations, and clearing firms — “to address, manage, and mitigate with vigilance.”
Division of Examinations’ Acting Director Richard Best commented:
In this time of heightened market volatility, our priorities are tailored to focus on emerging issues, such as crypto assets and expanding information security threats, as well as core issues that have been part of the SEC’s mission for decades — such as protecting retail investors.
The Examination Priorities report lists five “significant focus areas,” and “Emerging technologies and crypto assets” is one of them. The others are: pension funds; ESG (environmental, social and governance) investing; Standards of Conduct; Information Security and Operational Resiliency.
Regarding crypto assets, the SEC explained that “The Division will conduct examinations of broker-dealers and RIAs [registered investment advisors] 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.” The securities watchdog elaborated:
Market participants who are involved with crypto assets continue their examinations and will evaluate the offer, sale and recommendation of these assets.
“In addition, the Division will conduct examinations of mutual funds and ETFs [exchange-traded funds] offering exposure to crypto assets to assess, among other things, compliance, liquidity, and operational controls around portfolio management and market risk,” the report details.
How do you feel about crypto being a priority exam area for the SEC this year? Please leave your comments below.
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