As reported in more detail on our Regulatory Oversight blog, the Securities and Exchange Commission’s Division of Examinations recently released its 2024 Examination Priorities report. The report underscores the SEC’s intent to focus on risk areas impacting market participants, particularly those related to cryptocurrency and emerging technology.
The SEC will scrutinize the offer, sale, recommendation, and trading of crypto assets. This includes assessing whether registrants meet their standards of conduct when advising on crypto products, and whether they routinely review and enhance their compliance practices. Technological risks associated with blockchain and distributed ledger technology will also be examined. In addition, the SEC will pay attention to broker-dealers and investment advisers leveraging emerging technology, such as mobile applications and automated investment advice.
The report also highlights the SEC’s focus on anti-money lL\aundering (AML) compliance. Financial institutions are required by the Bank Secrecy Act (BSA) to establish AML programs tailored to their specific risks. The Examinations Division will review whether broker-dealers and investment companies are appropriately tailoring their AML programs, conducting independent testing, establishing adequate customer identification programs, and meeting suspicious activity report obligations.
The report underscores the SEC’s commitment to closely monitor the impact of digital assets and emerging technologies on the market. Proactive compliance measures are essential for industry participants to successfully navigate future examinations.