A flag outside the U.S. Securities and Exchange Commission headquarters in Washington, D.C., U.S., on Wednesday, Feb. 23, 2022.
Al Drago | Bloomberg | Getty Images
The Securities and Exchange Commission will increase its scrutiny of crypto-trading firms and investment advisors in addition to Environmental, Social and Governance — or ESG — funds, amongst other issues on its list of top oversight priorities for 2023.
The annual list provides a road map for the SEC’s focus over the approaching yr and reflects areas it believes pose probably the most risk to investors and the health of U.S. capital markets. Released Tuesday, this yr’s list shows “the changing landscape and associated risks within the securities market,” Richard R. Best, director of the Division of Examinations, said in a press release.
The priorities were released two months after the securities agency issued recent guidance, requiring publicly traded corporations to reveal their exposure to the cryptocurrency market. It also follows SEC Chair Gary Gensler’s warning to cryptocurrency firms to “come into compliance” with securities laws after crypto exchange FTX filed for bankruptcy.
This yr, the SEC’s examinations division will focus its attention on broker-dealers and registered investment advisors who use emerging financial technologies, including crypto. Examinations will have a look at the “offer, sale, advice of or advice regarding trading in crypto or crypto-related assets” and whether standards of care were met or followed by advisors and routinely updated, as needed.
The House Financial Services Committee also recently formed a working group to rein in what the panel’s Republicans call the SEC’s overreach on ESG. The group goals to “combat the threat to our capital markets posed by those on the far-left pushing environmental, social, and governance (ESG) proposals,” in accordance with its Feb. 3 press release. The securities agency has committed to be certain that ESG-related advisory services and funds are investing in what the firms say they’re buying, in accordance with the announcement.
Last yr, the agency proposed recent rules to ban misleading or deceptive claims on ESG fund names within the U.S. and enhanced their disclosure requirements.
The division’s other priorities include:
- Investment advisor and investment company marketing rules: whether or not they’ve implemented and adopted recent rules designed to reduce advisor violations.
- Registered investment advisors to non-public funds: To evaluate compliance and other risks in addition to if advisors are adhering to their duties as fiduciaries.
- Retail investors and dealing families: Ensuring these groups receive advice of their best interests from broker-dealers and registered investment advisors.
- Information security and operational resiliency: Examining cybersecurity protocols in addition to data protection for patrons.
“In a time of growing markets, evolving technologies, and recent types of risk, our Division of Examinations continues to guard investors,” said Gensler. “In executing against the 2023 priorities, the Division will help ensure compliance with the federal securities laws and rules.”
The annual priorities are compiled with input from the SEC chair and agency commissioners, in addition to from other SEC staff, federal financial regulators, investors and industry groups.
