The U.S. Securities and Exchange Commission's Office of Compliance Inspections and Examinations (OCIE) outlined its priorities for the coming year, including its views on the oversight needs posed by digital assets.
In the new document, the agency emphasized how the emerging digital assets market presents risks to retail investors who do not necessarily understand how these assets differ from traditional ones.
"Due to these risks, OCIE will continue to identify and examine SEC-registered market participants engaged in this space. Examinations will assess the following: (1) investment suitability, (2) portfolio management and trading practices, (3) safety of client funds and assets, (4) pricing and valuation, (5) effectiveness of compliance programs and controls, and (6) supervision of employee outside business activities," the report noted.
The new release both builds on and echoes those the agency has put out in recent years.
OCIE first included a section on cryptocurrency in its 2018 examination priorities, when it generally spoke of the need to examine how service providers safeguard client assets and whether they properly disclose the risks associated with their products.
In 2019, OCIE narrowed down its crypto focus and more clearly stated its plan to monitor market participants in terms of portfolio management, trading practices, safety of client funds, pricing, compliance, and internal controls. This year, the agency reiterated its 2019 objectives while adding an assessment goal regarding the “supervision of employee outside business activities.”
The document also discussed OCIE's intention to continue examining transfer agents’ role in record keeping and the safeguarding of funds and securities. Its main areas of focus, the document says, include transfer agents who develop blockchain technology and those who provide digital assets services.