In addition to other topics on its list of top oversight objectives for 2023, the Securities and Exchange Commission will intensify its examination of crypto-trading companies, investment advisors, and Environmental, Social, and Governance (or ESG) funds.
The SEC’s annual list, which highlights the areas it feels pose the most risk to investors and the health of the U.S. capital markets, serves as a roadmap for its priorities during the upcoming year. This year’s list, which was unveiled on Tuesday, demonstrates “the shifting landscape and associated risks in the securities market,” according to a statement from Richard R. Best, director of the Division of Examinations.
Two months after the Securities and Exchange Commission published new recommendations mandating publicly traded businesses to report their exposure to the cryptocurrency industry, the priorities were made public. Additionally, it comes after cryptocurrency exchange FTX declared bankruptcy and SEC Chair Gary Gensler urged cryptocurrency companies to “come into compliance” with securities regulations.
The examinations division of the SEC will concentrate its efforts this year on broker-dealers and registered investment advisors who make use of cutting-edge financial innovations, such as cryptocurrency. The “offer, sale, recommendation of or advise about trading in crypto or crypto-related assets” will be examined, as well as whether advisors adhered to standards of care and regularly updated them as necessary.
In order to curtail what the panel’s Republicans see as the SEC’s overreach on ESG, the House Financial Services Committee recently established a working group. In a news release dated Feb. 3, the group stated that its goal was to fight the threat to its capital markets posed by those on the far-left advocating environmental, social, and governance (ESG) ideas. According to the release, the securities agency has pledged to guarantee that advisory services and funds focused on environmental, social, and governance issues invest in the securities that the companies claim to be purchasing.
The agency increased the disclosure requirements for ESG funds and proposed new regulations last year to outlaw false or misleading representations of their names.
The additional priorities of the division are:
- Examining whether investment advisors and investment firms have embraced and implemented new regulations aimed at reducing advisor breaches.
- Registered investment advisors to private funds: determining if advisors are abiding by their fiduciary responsibilities while also assessing compliance and other risks.
- Making sure that advice from registered investment advisors and broker-dealers is given to working families and retail investors in their best interests.
- Examining cybersecurity protocols as well as customer data protection is part of the study of information security and operational resilience.
Our Division of Examinations continues to safeguard investors in an era of expanding markets, developing technologies, and new kinds of risk, according to Gensler. In order to maintain compliance with the federal securities laws and regulations, the Division will assist in carrying out the 2023 priorities.
The SEC chair, agency commissioners, other SEC personnel, federal financial regulators, investors, and industry groups are all consulted while creating the yearly priorities.
