Broker cryptocurrency offers are at the heart of SEC's review


The main regulator of Wall Street is increasing control over the intermediaries who treat cryptocurrencies, according to two people familiar with the issue, the last sign that the authorities want to know more about a growing market that they fear may be full of misconduct [19659002] In recent weeks, intermediaries have been conducted with questions from examiners of the Securities and Exchange Commission on their business practices and how they deal with customers, according to one of the people who requested Anonymity to discuss the review. Among other things, the SEC is looking for specific information on the commissions generated by trading, financing and the initial offer of coins. The agency is also collecting data on the involvement of investment advisers, another person said.

Cryptocurrencies have received increasing attention in recent years from regulators, including SEC President Jay Clayton, who said they believe the ICO market is full of fraud. The agency's audit unit has sued companies that alleges violations of securities laws through coin offerings and Bloomberg News reported that attorneys from the Department of Justice have opened an investigation criminal about the fact that traders are manipulating the price of Bitcoin and other digital currencies. [19659006] They are mostly smaller brokerage firms that deal with virtual tokens. No Wall Street bank currently trades cryptocurrencies.

Corporate Governance

The SEC Audit, led by the Office of Compliance Inspections and Examinations, follows requests for information from hedge funds on how they evaluate digital investments. These are industry self-regulators like Financial Industry Regulatory Authority and members of the National Futures Association's application companies on their relationships with cryptocurrencies.

"They are trying to understand the whole ecosystem", John L Jacobs, executive director of the Georgetown Center for Markets and Financial Policy at the University of Georgetown, has declared requests from regulatory bodies. "They are still struggling to make sure this is an efficient organized market."

Natalie Strom, a spokeswoman for Clayton, declined to comment.

The primary function of the OCIE is to conduct examinations with the aim of protecting investors and ensuring market integrity. When the inspectors of the unit identify signs of misconduct, they usually report the results to the SEC control division for further checks that may lead to formal investigations, fines and other penalties when irregularities are discovered

"Retail investors "

" The cryptocurrency and ICO markets have grown rapidly and present a number of risks for retail investors, "said OCIE in a February report outlining exam priorities for this year. "Areas of interest will include, among other things, whether financial professionals will maintain adequate controls and safeguards to protect these assets from theft or misappropriation."

Of course, some intermediaries and money managers have reported their involvement with regulators and asked for guidance to ensure that they comply with the law. Others have been less imminent, and the regulatory landscape is complicated by legal disputes about which assets should be considered securities under the jurisdiction of the SEC.

In addition to asking mediators if they were involved with ICO, the SEC was also questioning companies about their compensation agreements, as well as on staff and other internal issues, one of the people said. Finra, the first-line brokerage regulator overseen by the SEC, sent businesses a notice last month asking them to notify the agency if they are involved with digital assets.

NFA, the industry-financied regulator for the derivatives industry, notified Commodity Futures Trading Commission last month that plans to request that companies dealing with cryptocurrency and liquidity derivatives do more information.

"It looks like it is moving from where the house is on fire to incorporate the supervision of intermediaries," said Jeff Bandman, director of Bandman Advisors, whose clients include cryptographic companies.

– With the assistance of Matt Robinson

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