The US Securities and Exchange Commission (SEC) is investigating traditional Wall Street investment advisers who may be offering their clients custody of digital assets without proper qualifications.
According to a Jan. 26 Reuters report citing “three sources familiar with the investigation,” the SEC investigation has been ongoing for several months but has accelerated following the crash of crypto exchange FTX.
The SEC investigation has not been previously disclosed as the agency’s investigation is not public, the sources said.
The bulk of the SEC’s efforts in this investigation are examining whether registered investment advisers complied with rules and regulations on custody of clients’ crypto assets, Reuters reported.
By law, investment advisory firms must be “qualified” to offer custody services to clients e comply with safekeeping guarantees set forth in the Investment Advisers Act of 1940.
Cointelegraph reached out to the SEC to seek clarification on the matter, but received no response.
If adopted, our best ex rule would help ensure that brokers have policies and procedures in place to meet one of their most important obligations: to seek best execution when trading securities, be they stocks, fixed income, options, crypto security tokens or other titles.
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
The recent revelation suggests that the SEC has been doing no favors for traditional investment firms in the digital asset space, Anthony Tu-Sekine, who heads Seward and Kissel’s Blockchain and Cryptocurrency Group, said in a note to Reuters:
“This is an obvious compliance issue for investment advisers. If you have client assets in custody that are securities, you must hold them with one of these qualified custodians.”
“I think it’s an easy decision for the SEC to make”he added.
On November 15, 2022, the Wall Street Blockchain Alliance (WSBA) wrote a letter to the SEC to request clarity on any changes to be made to the “Custody Rule” relating to digital assets.
Cointelegraph has reached out to the WSBA to see if it has received a response from the SEC.
Meanwhile, the securities regulator continued to strengthen its crypto enforcement efforts throughout the year. As of May 2022, it has grown its “Crypto Assets and Cyber Unit” team by nearly 100%.
She also handled the ongoing lawsuit against Ripple Labsactions related to the bankruptcy of FTX and its founder Sam Bankman-Fried, and many others.
