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.
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 highlights 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 relate 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 also 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,
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:…
