SEC Broadens Its Gaze: Crypto Brokers and AI in Regulatory Spotlight

by Tareq Sikder
  • The SEC has broadened its focus to include broker-dealers and advisers operating within the crypto sector.
  • Its aim is to focus on areas of heightened risk for retail investors.
US SEC
US SEC
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The United States Securities and Exchange Commission (SEC) has unveiled its 2024 examination priorities report. It has shaded light on the regulatory body's areas of concern for the upcoming year. Notably, the report places a strong emphasis on the cryptocurrency market and emerging technologies.

SEC's Division of Examinations Signals Increased Scrutiny for Cryptocurrency

The SEC's Division of Examinations, which has been releasing similar reports for over a decade, is making it clear that cryptocurrency dealer-brokers and other industry players should be prepared for heightened scrutiny.

The report highlighted that the Division of Examinations has augmented its capabilities by establishing specialized teams within its various programs to address the challenges posed by cryptocurrency, fintech, artificial intelligence, and cybersecurity. In 2023, the division's focus extended to broker-dealers and advisers operating in the cryptocurrency sector.

The SEC is closely monitoring registrants who are adopting new practices. Especially, those related to technology and online solutions designed to meet compliance and marketing demands. These practices encompass automated investment tools, artificial intelligence, and trading algorithms or platforms.

Examinations will evaluate how well registrants adhere to standards of conduct in customer advice and their understanding of the products they offer. The report underscores a focus on older investors and retirement assets. Registrants are expected to comply with the latest guidance, with particular attention to "custody requirements under the Advisers Act."

Significance of the 2024 Examination Priorities Report

The SEC is additionally committed to examining the handling of risks associated with blockchain and distributed ledger technology in the financial sector. It underlines the importance of ensuring the secure and compliant use of these emerging technologies.

The report mentions examinations of transfer agents servicing crypto asset securities issuers or using cutting-edge technologies in their operations. It emphasizes the SEC's commitment to staying abreast of evolving market practices.

This year's examination priorities report holds a distinct significance as it is the first to appear at the commencement of the new fiscal year. Richard Best, the Director of the Division of Examinations, pointed out that the aim is to enhance transparency in the examination program and encourage firms to concentrate their efforts on areas where retail investors might face heightened risks.

He stated: "Continuing to make our examination priorities public increases transparency into the examination program and encourages firms to focus their compliance and surveillance efforts on areas of potentially heightened risk to retail investors."

The United States Securities and Exchange Commission (SEC) has unveiled its 2024 examination priorities report. It has shaded light on the regulatory body's areas of concern for the upcoming year. Notably, the report places a strong emphasis on the cryptocurrency market and emerging technologies.

SEC's Division of Examinations Signals Increased Scrutiny for Cryptocurrency

The SEC's Division of Examinations, which has been releasing similar reports for over a decade, is making it clear that cryptocurrency dealer-brokers and other industry players should be prepared for heightened scrutiny.

The report highlighted that the Division of Examinations has augmented its capabilities by establishing specialized teams within its various programs to address the challenges posed by cryptocurrency, fintech, artificial intelligence, and cybersecurity. In 2023, the division's focus extended to broker-dealers and advisers operating in the cryptocurrency sector.

The SEC is closely monitoring registrants who are adopting new practices. Especially, those related to technology and online solutions designed to meet compliance and marketing demands. These practices encompass automated investment tools, artificial intelligence, and trading algorithms or platforms.

Examinations will evaluate how well registrants adhere to standards of conduct in customer advice and their understanding of the products they offer. The report underscores a focus on older investors and retirement assets. Registrants are expected to comply with the latest guidance, with particular attention to "custody requirements under the Advisers Act."

Significance of the 2024 Examination Priorities Report

The SEC is additionally committed to examining the handling of risks associated with blockchain and distributed ledger technology in the financial sector. It underlines the importance of ensuring the secure and compliant use of these emerging technologies.

The report mentions examinations of transfer agents servicing crypto asset securities issuers or using cutting-edge technologies in their operations. It emphasizes the SEC's commitment to staying abreast of evolving market practices.

This year's examination priorities report holds a distinct significance as it is the first to appear at the commencement of the new fiscal year. Richard Best, the Director of the Division of Examinations, pointed out that the aim is to enhance transparency in the examination program and encourage firms to concentrate their efforts on areas where retail investors might face heightened risks.

He stated: "Continuing to make our examination priorities public increases transparency into the examination program and encourages firms to focus their compliance and surveillance efforts on areas of potentially heightened risk to retail investors."

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