SEC to Monitor Crypto Brokers and Advisors in 2023

SEC's New Monitoring Initiative

The US Securities and Exchange Commission (SEC) has announced its commitment to closely monitor crypto brokers and advisors throughout 2023. This initiative aims to ensure that these entities adhere to established standards when issuing investment recommendations and advice to clients. The SEC's move is part of its broader strategy to safeguard investors and uphold market integrity.

Focus on Compliance and Risk Management

The SEC's Division of Examinations will assess the compliance, disclosure, and risk management practices of broker-dealers and independent investment advisors. The agency aims to verify adherence to regulations, particularly in light of new financial technologies and practices used to meet compliance and marketing needs. This effort is intended to maintain high-quality examinations and keep pace with emerging industry trends and risks.

Annual Examination Priorities

Every year, the SEC outlines its examination priorities to highlight key risk areas. In 2023, the focus extends to private funds, retail investor protections, information security, operational resiliency, emerging technologies, and crypto assets. This is a continuation of its 2022 priorities, reaffirming the regulator's commitment to addressing and mitigating risks in these areas.

Ongoing Investigations and Legal Actions

The SEC's increased scrutiny comes amid ongoing investigations into FTX co-founder Sam Bankman-Fried and other executives for alleged wire fraud and money laundering. The agency has accused them of defrauding investors of significant amounts. As part of its regulatory efforts, the SEC has also taken legal action against companies like LBRY for not registering tokens as securities, although recent court rulings have provided some clarity on the matter.

Implications for the Crypto Industry

In response to significant events impacting the crypto industry last year, the SEC is taking a more proactive role in regulation. By scrutinizing compliance with guidelines, the agency aims to enhance investor protection in the volatile crypto markets. This increased oversight signals the SEC's determination to ensure transparency and accountability within the industry.