The financial inspectors of the SEC publish their top priorities at the beginning of every year in an effort to improve compliance, prevent fraud, monitor risk, and inform regulatory policy. This year, tacking fraud in the ICO and cryptocurrency markets takes center stage.
SEC Priorities for 2018
The US Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) announced on Wednesday its 2018 examination priorities. A particular interest will be placed this year on matters involving critical market infrastructure, duties to retail investors, and developments in cryptocurrency, initial coin offerings, and secondary market trading. The investigators will continue to monitor the growth of cryptocurrencies and initial coin offerings (ICOs) and “examine registrants involved in their offer and sale to ensure that investors receive adequate disclosures about the risks associated with these investments.”
“I appreciate OCIE’s dedication to maximizing the effectiveness of their resources with a keen eye toward asset verification, market infrastructure, and duties owed to retail investors,” commented SEC Chairman Jay Clayton.
“As the markets continually evolve and the products and services available to investors adapt, OCIE remains committed in its risk-based examination program to prioritizing the interests of retail investors and examining those aspects of securities firms posing risks to investors and the proper functioning of our capital markets,” added OCIE Director Pete Driscoll.
Protecting Retail Investors
In the program document, the regulators explain that: “The cryptocurrency and ICO markets have grown rapidly and present a number of risks for retail investors. Along with the growth of these products and markets, the number of broker-dealers and investment advisers engaged in this space continues to grow as well. We will continue to monitor the sale of these products, and where the products are securities, examine for regulatory compliance.”
Areas of focus will include, among other things, “whether financial professionals maintain adequate controls and safeguards to protect these assets from theft or misappropriation, and whether financial professionals are providing investors with disclosure about the risks associated with these investments, including the risk of investment losses, liquidity risks, price volatility, and potential fraud.”