The United States 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 from January 26 quoting “Three sources with knowledge of the investigation” said the SEC investigation is already several months old, but accelerated after the crash of crypto exchange FTX.
The SEC’s investigations have not been previously disclosed as the agency’s inquiries are not public, the sources said.
According to the Reuters report, much of the SEC’s efforts in this investigation are investigating whether registered investment advisers have complied with rules and regulations regarding the custody of clients’ crypto assets.
By law, investment advisory firms must be “qualified” to offer custodial services to clients, in addition to meeting the custodial guarantees set forth in the Investment Advisers Act of 1940.
Cointelegraph reached out to the SEC to seek clarity on the matter, but did not receive an immediate response.
If adopted, our best rule of thumb would help ensure that brokers have policies and procedures in place to meet one of their most important obligations: seeking best execution when trading securities, whether stocks, fixed income, options, cryptocurrency tokens, or other values. . pic.twitter.com/gZdIEcNbVY
—Gary Gensler (@GaryGensler) January 24, 2023
The recent disclosure suggests that the SEC has not turned a blind eye to traditional investment firms in the digital asset space, Anthony Tu-Sekine, who heads the Seward and Kissel Blockchain and Cryptocurrency Group, said in a note to Reuters. :
“This is an obvious compliance issue for investment advisers. If you have custody of client assets that are securities, then you must keep them in custody with one of these qualified custodians.”
“I think it’s an easy decision for the SEC to make,” he added.
Related: Senator Warren Proposes Cutting Wall Street’s Involvement In Crypto
On November 15, the Wall Street Blockchain Alliance (WSBA) wrote a letter to the SEC to seek clarity on what potential amendments, if any, apply to the “Custody Rule” as it relates to digital assets.
Cointelegraph has reached out to the WSBA to determine if they have received a response from the SEC.
Meanwhile, the securities regulator has continued to bolster its crypto enforcement efforts during the year. In May 2022, it increased its “Crypto Assets and Cyber Unit” team by almost 100%.
He is also 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 more.
