The United States Securities and Exchange Commission (SEC) has released its highly anticipated 2024 Examination Priorities Report, shedding light on the regulatory body’s focal points for the coming year. This comprehensive report, issued by the SEC’s Division of Examinations, signals a robust emphasis on the cryptocurrency market and emerging technologies. The SEC is leaving no stone unturned in its mission to ensure compliance and protect investors in this rapidly evolving landscape.
A standout feature of the 2024 report is the heightened scrutiny directed towards cryptocurrency dealer-brokers and other participants in the crypto market. The Division of Examinations has bolstered its capabilities by establishing specialized teams to address the unique challenges presented by cryptocurrency, fintech, artificial intelligence, and cybersecurity. This increased focus follows a trend that began in 2023 when examinations extended to broker-dealers and advisers operating in the cryptocurrency sector.
New practices in technology and SEC compliance
The SEC is closely monitoring registrants who are adopting innovative practices, particularly in the realm of technology and online solutions designed to meet compliance and marketing demands. This encompasses automated investment tools, artificial intelligence, and trading algorithms or platforms. Examinations will delve into how well registrants adhere to standards of conduct in customer advice and their understanding of the products they offer.
The report underscores a particular focus on older investors and retirement assets, emphasizing compliance with the latest guidance, including “custody requirements under the Advisers Act.”
In addition to cryptocurrency, the SEC is committed to examining the risks associated with blockchain and distributed ledger technology within the financial sector. The report underscores the importance of ensuring the secure and compliant use of these emerging technologies.
It also mentions examinations of transfer agents servicing crypto asset securities issuers or utilizing cutting-edge technologies in their operations. This focus highlights the SEC’s dedication to staying abreast of evolving market practices.
The 2024 Examination Priorities Report holds distinct significance as it marks the commencement of the new fiscal year. Richard Best, Director of the Division of Examinations, emphasized the SEC’s commitment to enhancing transparency in the examination program and encouraging firms to concentrate their efforts on areas where retail investors might face heightened risks.
Director Best stated,
“Continuing to make our examination priorities public increases transparency into the examination program and encourages firms to focus their compliance and surveillance efforts on areas of potentially heightened risk to retail investors.”
