SEC’s Crypto Oversight: FY 2023 Highlights

The Securities and Exchange Commission (SEC) has unveiled its comprehensive activities and focal points for the fiscal year 2023, revealing a robust commitment to regulating and safeguarding the evolving cryptocurrency landscape. Across its various divisions, the SEC’s efforts were directed toward bolstering investor protection, ensuring market integrity, and adapting to the dynamic financial markets.

Investment Management (IM) Division:

Within the IM division, scrutiny of global market events and developments in the crypto sphere took center stage. A particularly sharp focus was directed toward mutual funds and ETFs eyeing investments in crypto-related instruments, emphasizing the paramount importance of safeguarding investors. Collaborative efforts with other SEC divisions aimed at vigilant monitoring of crypto asset trading, lending, and decentralized finance (DeFi) platforms, with stablecoins being a significant area of scrutiny.

Trading and Markets (TM) Division:

TM led the charge on multiple fronts, spearheading rulemaking initiatives to enhance market efficiency and competition. Proposals in December 2022 targeted the $40 trillion equity markets, introducing measures such as the best execution standard and addressing advantages in off-exchange market centers. Moreover, TM’s rulemaking efforts extended to bolstering market integrity, culminating in the adoption of final rules related to security-based swaps and credit ratings under the Dodd-Frank Act.

Corporation Finance (CF) Division:

CF meticulously reviewed documents from 7,800 public companies and entities eyeing public listing in FY 2023, particularly focusing on the surge in IPOs and SPACs. Public statements were issued on disclosure requirements, covering pivotal topics like geopolitical tensions and disruptions within crypto asset markets. CF’s scope also encompassed reviews of disclosures under new regulations, including pay versus performance mandates.

Enforcement (ENF) Division:

ENF maintained an active investigative stance in the evolving crypto asset space. Legal actions were initiated against individuals and entities engaged in diverting customer funds, governance token manipulation, and unregistered securities offerings through crypto-based lending programs. Notably, enforcement actions also targeted celebrities and influencers for promoting crypto asset securities without disclosing compensation.

Office of Compliance Inspections and Examinations (EXAMS):

EXAMS prioritized investor protection through thorough reviews focusing on Regulation Best Interest and fiduciary standards. Key areas included cybersecurity, operational resilience, crypto assets, Regulation SCI compliance, and environmental, social, and governance investing. The issuance of Investor Alerts, covering topics such as crypto asset securities and investment scams linked to natural disasters, underscored the commitment to investor education.

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