U.S SEC Steps Up Efforts To Reduce Crypto Investment Fraud

Wilfred Michael 

Wilfred Michael

News reporter

08 November 2018,
U.S SEC Steps Up Efforts To Reduce Crypto Investment Fraud

The U.S Securities and Exchange Commission (SEC) has never taken it easy with fraudsters who rip unsuspecting investors of their crypto assets and is not planning to slow down their effort anytime soon.

The watchdog has even doubled on the measures they take to track down such fraudulent investment opportunities.

According to a publication released by Politico, this is the first time that the SEC is asking investment advisers who are registered under the agency to provide information on how they (the advisers) deal with cryptocurrencies kept under their custody by clients.

It is said that the primary reason behind the new movement is for the SEC to discover how the advisory firms are storing the cryptocurrency. Also, the regulatory agency wants to know whether the firms are manipulating market prices and whether the assets are safely put away from cybercriminals.

At the end of the current investigations, anonymous sources quoted in the publication suggested that asset managers who do not strong policies detailing how they store cryptos will face the ire of the SEC.


Managing The Old and New Assets

Asset managers who hold stocks and bonds worth more than $100 million for its clients are usually regulated by the SEC, and by law are obliged to store the assets with a bank or brokerage firm.

With cryptocurrencies, however, the situation is very different since the assets are stored in digital wallets, and there are very few companies who are providing cryptocurrency custody services to asset managers. Irrespective of this scarcity, the SEC is still expecting that firms will have strong custody policies before exposing clients to crypto investment.

Gail Bernstein, general counsel at Washington’s Investment Adviser Association (IAA), suggests only one way that investment advisers can stay clear of the ongoing sweep by the SEC. She said,

“Advisers should think about investments in crypto assets the same way they think about any investments, through the lens of their fiduciary duty and compliance programs,"

Meanwhile, she expects that the SEC will publish “its findings and observations” after the regulatory probe, thus, providing investment advisers with more clarity on what obligations they will have to comply with while dealing with cryptocurrencies in the future.