The SEC probes Wall Street to check crypto regulatory compliance

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Key Takeaways:

  • The Securities and Exchange Commission (SEC) of the United States has been assessing traditional Wall Street financial advisers.
  • The regulator has been examining authorised investment advisors for how they have provided crypto custodial rights to their service users.

According to three inidviduals with knowledge of the investigation, the U.S. Securities and Exchange Commission is looking into registered investment advisers to see if they are complying with regulations regarding the custody of client cryptocurrency assets.

The SEC’s investigation has been ongoing for a while, but it has picked more steam with the demise of the cryptocurrency exchange FTX. The SEC’s inquiries are not made public, according to the sources, therefore, the investigations by the agency were previously unknown.

A significant portion of the SEC’s probe focuses on registered investment advisers to check if they have complied with the regulations regarding the safekeeping of customer crypto assets.

Investment advisory organisations must be “qualified” to offer custody services to clients and must adhere to the custodial safeguards described in the Investment Advisers Act of 1940.

According to one of the sources, SEC enforcement personnel are requesting information from investment advisers on the steps taken by their companies to determine custody for platforms like FTX.

Gary Gensler, the chairman of the Securities and Exchange Commission, believes that deploying the “best ex rule” would ensure that brokers have procedures and guidelines in place to affirm one of their most important responsibilities. These obligations motivate them to pursue the highest performance when trading securities, whether they are equities, fixed income, options, crypto security tokens, or other securities.

The SEC’s apparent extensive authority for enforcement and inquiry is quite unexpected. Many believe this to be an indication that the top U.S. markets regulator’s investigation into the cryptocurrency business is now covering more established Wall Street corporations.

The securities regulator has continued and stepped up attempts to enforce cryptocurrency legislation throughout the year. In May 2022, it more than doubled the size of its “Crypto Assets and Cyber Unit” staff.

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Aadrika Sharma
Aadrika Sharma

I enjoy writing and try to learn new things every passing day!

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