SEC Warns Financial Pros of Crypto Assets’ Risky Future
- The SEC warns financial professionals about the risk of crypto assets and recommends “heightened scrutiny” in their evaluation.
- The regulator identifies cryptocurrencies as one of the assets that require special attention due to their complexity and risk factor.
- SEC’s bulletin aims to influence financial advisors’ recommendations to retail investors and highlights various other investment vehicles that carry additional risk.
U.S. Securities and Exchange Commission issued a bulletin that urged finance professionals to exercise caution when dealing with certain investment products.
The bulletin advised broker-dealers and investment advisors to thoroughly understand the risks associated with complex products that carry additional risk. The SEC specifically named cryptocurrencies, or “crypto asset securities,” as one such class of assets that require “heightened scrutiny” from financial professionals.
In addition to cryptocurrencies, the bulletin listed a number of other investment vehicles that carry additional risk, including inverse or leveraged exchange-traded products (ETPs), margin-traded instruments, derivatives, penny stocks, and various other assets. The purpose of the bulletin is to guide financial professionals in how they recommend certain assets to retail investors. While it does not represent a regulatory policy, it is nevertheless an important reminder of the importance of due diligence when investing in complex financial products.
The cryptocurrency industry has continued to grow and evolve. In fact, the SEC has taken enforcement action against a number of cryptocurrency companies in recent years, including a recent case against Bittrex. Meanwhile, SEC chair Gary Gensler has faced criticism from Republican lawmakers over his agency’s approach to regulating the cryptocurrency industry. While the future of cryptocurrency regulation remains uncertain.
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