Key Points:
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.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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