SEC to probe firms giving advice for crypto trading
Cryptocurrency firms that offer crypto trading advice will be scrutinised by the US SEC (Securities and Exchange Commission). The financial watchdog has announced its 2023 priorities to protect retail investor rights.
On 7 February, the US regulator released an official statement outlining its annual agenda. It indicated that the Division of Examinations would inspect crypto advisors and brokers' businesses. These firms need to have appropriate market exposure and the right strategies for advising traders.
Firms offering advice need to be careful
The SEC has remarked that financial advisors need to be cautious while giving buying and selling advice. Moreover, they must be watchful of the digital assets they recommend.
The commission’s Division of Examinations will observe how firms make referrals and recommend a product. The Division will also inspect whether its registered firms continually update their strategies for providing crypto trading advice. Advisors’ and brokers’ strategies should comply with the regulations and ensure risk management for traders.
What’s on the SEC's 2023 agenda?
The US crypto regulator publishes its priorities annually to outline its agenda. Previously, the SEC released its priorities for 2022. Its focus was more on ESG investment, private funds, and emerging technologies in the market.
However, the regulators’ focus shifted toward digital investment advisors in 2023. As per the statement, the “changing landscape and associated risks in the securities market” prompted the change.
The emphasis of the crypto regulators will be on the policies of Advisors Act policies. For this reason, SEC’s Division will continually scrutinise registered investment advisers (RIAs). It will ensure that the advisors comply with the policies and follow the standard procedures. The main objective behind this is to provide security to retail investors.
On the other hand, ESG, private funds, emerging technologies, and operational resiliency are also part of the SEC’s agenda.
Author: Wasay Ali
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