Stifel CEO Calls on SEC to Extend Customer Protection to Crypto

To restore customer confidence in the cryptocurrency industry after the fall of crypto exchange FTX, the Securities and Exchange Commission (SEC) should apply its Customer Protection Rule to crypto, Stifel Financial CEO Ron Kruszewski said.

This would ensure that customers’ funds aren’t comingled, the head of the wealth management and investment banking firm told CNBC in a Monday (Nov. 21) interview.

“That’s table stakes and, frankly, I can’t imagine anyone disagreeing with that,” Kruszewski said.

What’s more, it’s a solution that already exists, if the SEC would enforce it. If the agency feels it doesn’t have jurisdiction over the crypto industry, Congress should assure the SEC that it does and that it can enforce this existing rule, Kruszewski said.

“There’s a fire going in confidence in crypto,” Kruszewski told the media outlet. “We shouldn’t be deciding which fire department needs to go. Let’s get on this, get the Customer Protection Rule in place.”

The Customer Protection Rule (Rule 15c3-3), which has been in place since the 1970s, requires broker-dealers to segregate customer securities and cash from the firm’s own funds that it uses to conduct trades and other transactions, thereby protecting customer assets if the firm fails.

“What makes the U.S. markets as strong as they are is that no matter what it is, if you take customer funds, you cannot use those customer funds in your business,” Kruszewski said in the interview. “That rule has been on the books for 50 years. Why it does not apply to crypto is something that we need to fix.”

This statement comes after it was reported Nov. 10 that, in a bid to prop up his trading firm Alameda Research, Sam Bankman-Fried loaned the firm billions of dollars from his FTX platform, including more than $8 billion in customer funds, a move that apparently set in motion FTX’s collapse.