The US Securities and Exchange Commission (SEC) has been investigating traditional Wall Street investment advisers who may be offering custody of digital assets to their clients without the proper qualifications.
A Reuters report on January 26 citing “three sources with knowledge of the investigation” claims that The SEC investigation has been underway for several months now, but has accelerated after the collapse of crypto exchange FTX.
The SEC’s investigations were not previously known, as the agency’s investigations are not public.the sources said.
According to the Reuters report, Much of the SEC’s efforts in this investigation are focused on whether registered investment advisers have complied with rules and regulations surrounding the safekeeping of clients’ crypto assets.
By law, investment advisory firms must be “qualified” to offer custodial services to clients, in addition to meeting the custodial safeguards set forth in the Investment Advisers Act of 1940.
Cointelegraph reached out to the SEC to clarify this matter, but did not receive an immediate response.
If adopted, our best ex rule would help ensure that brokers have policies & procedures in place to uphold one of their most important obligations: to seek best execution when trading securities, whether equities, fixed income, options, crypto security tokens, or other securities . pic.twitter.com/gZdIEcNbVY
—Gary Gensler (@GaryGensler) January 24, 2023
If adopted, our former best rule would help ensure that brokers have policies and procedures in place to uphold one of their most important obligations: seeking best execution when trading securities, whether stocks, fixed income, options, cryptocurrency tokens, or other securities. .
The recent revelation suggests that the SEC has not turned a blind eye to traditional investment firms in the digital asset space, said Anthony Tu-Sekine, who heads Seward and Kissel’s Blockchain and Cryptocurrency Group in a note to Reuters:
“This is an obvious compliance issue for investment advisers. If you have custody of client assets that are securities, you need to keep them in custody with one of these qualified custodians.”
“I think It’s an easy decision for the SEC,” he added.
On Nov. 15, the Wall Street Blockchain Alliance (WSBA) wrote a letter to the SEC seeking clarity on what, if any, potential amendments apply to the “Custody Rule” as it relates to digital assets.
Cointelegraph contacted the WSBA to find out if they have received a response from the SEC.
For his part, the securities regulator has continued to bolster its enforcement efforts to the cryptocurrency industry throughout the year. In May 2022, he increased his “Crypto Assets and Cyber Unit” team by almost 100%.
He has also been keeping busy dealing with the ongoing lawsuit against Ripple Labs, actions related to the collapse of FTX and its founder Sam Bankman-Fried, among many others.
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