Call it, perhaps, a New Year’s Resolution list — for regulators.
In documents released Tuesday (Jan. 8), the Securities and Exchange Commission’s (SEC’s) Office of Compliance and Examinations (OCIE) offered up a list of its priorities for the year that has just dawned. The list offers up a bit of a roadmap, perhaps, into where we might see change on a number of fronts.
Among them: cryptocurrencies and the financial (alternative) data that is used in the investment realm.
“The digital assets market has grown rapidly and presents various risks, including for retail investors who may not adequately understand the differences between these assets and more traditional products,” according to the office.
So, the focus will be on retail investors, where the OICE will look at, among other things, investment suitability and the effectiveness of compliance programs and controls, according to documentations. In addition, there will be examination of transfer agents (which help to settle transactions) that are developing blockchain technology.
And, generally speaking, the discussion of priorities mentions focus on firms’ disclosures and supervision of their “outside business activities” and “any conflicts that may arise from those activities.”
The sights seem set, then, on the mechanics of trading, and perhaps the document points the way to what we might think of as a more “normalized” environment of crypto-related activity. That’s especially true with the mention of the middlemen involved in that trading (the transfer agents).
Against that backdrop, we might see the continued evolution of tax policy tied to crypto, and perhaps more defined parameters of crypto as a distinct class of assets.
As reported last month, the SEC said it had postponed a decision on a proposed exchange traded fund (or ETF) that would have been offered by Wilshire Phoenix. The decision had originally been scheduled for Dec. 28, but it is now slated for the end of February. There are as of yet no bitcoin ETFs approved for trading.
The document comes after the new year has already seen a number of crypto-related actions by the SEC related to the very risks cautioned in the list of priority details. In one example, earlier this week, the SEC said it had reached a $400,000 settlement with Venkata Meenavalli, CEO of Longfin. In that case, Longfin had been falsely depicted as being based in the U.S. (for qualification of share sales), and it was alleged the revenues of the crypto company had been inflated. At the end of 2017, Longfin shares soared more than 1,000 percent on the heels of news Longfin was buying a crypto firm known as Ziddu.
In reference to financial technology, the OCIE noted in its 2020 priorities list, too, that alternative sources of data increasingly are being used by the investment industry. Examinations will, in 2020, focus on how that data is used to provide services to investors and other stakeholders.
The “OCIE will continue its focus on RIAs [registered investment advisors] that provide services to their clients through automated investment tools and platforms, often referred to as ‘robo-advisers,’” it reported.