The U.S. Securities and Exchange Commission (SEC) has released its 2024 examination priorities, and it’s evident that the regulatory body is stepping up its scrutiny of the crypto market. In a public disclosure, the SEC indicated its intent to focus on various aspects related to cryptocurrencies, reflecting the evolving landscape and growing investor interest in digital assets.
SEC Key 2024 Examination Priorities
The Division of Examinations within the SEC unveiled its examination priorities for the year 2024, shedding light on the areas where it will intensify its focus on protecting investors and maintaining the integrity of the financial markets. The SEC’s approach revolves around addressing emerging risks and preserving the well-being of investors, encompassing not only traditional financial instruments but also the rapidly expanding crypto market.
In-Depth Crypto Asset Monitoring
The SEC acknowledges the ever-present volatility and activity within the crypto asset markets and is committed to vigilant oversight. The Division of Examinations will continue to monitor the activities of registrants dealing with crypto assets, ensuring that they adhere to established standards and conduct themselves in a manner that safeguards the interests of customers and clients.
Specifically, the examinations will scrutinize the offer, sale, recommendation, advice, and trading of crypto assets, along with activities related to these assets or related products. By doing so, the SEC aims to assess whether registrants comply with the standards of conduct when advising customers on crypto assets, emphasizing the importance of adherence to regulatory protocols.
Enhanced Compliance Practices and Operational Resilience
The SEC will also delve into the compliance practices of registrants involved in the crypto space. This involves a thorough review of their custody practices, compliance with the Bank Secrecy Act (BSA), risk disclosures, and valuation procedures. The intent is to ensure that registrants maintain up-to-date compliance practices, reducing the risk of financial misconduct, and enhancing operational resilience.
Operational resilience will be a critical aspect of the examinations, focusing on data integrity and the development of robust business continuity plans. By doing so, the SEC aims to strengthen the overall stability and security of the crypto market.
Custody Requirements and Beyond
The SEC is not only looking at the broader crypto market but also diving into specifics. It will assess whether advisers handling crypto assets comply with custody requirements laid out under the Advisers Act. This examination will serve to ensure that investors’ assets are adequately safeguarded and that proper custodial procedures are followed.
Moreover, the Division of Examinations will devote considerable resources to examining new or emerging risks, evaluating evolving products and services, responding to market events, and addressing investor concerns.
This comprehensive approach emphasizes the SEC’s dedication to protecting the interests of the public and maintaining the integrity of the financial markets. As the crypto industry continues to evolve, regulatory scrutiny and oversight are expected to play a crucial role in its maturation.