NEW YORK (Reuters) – The U.S. Securities and Exchange Commission is probing registered investment advisers over whether they are meeting rules around custody of client crypto assets, three sources with knowledge of the inquiry told Reuters.
The SEC has been questioning advisers’ efforts to follow the agency’s rules around custody of clients’ digital assets for several months, but the probe has gathered pace in the wake of the blow-up of crypto exchange FTX, the sources said. They spoke on condition of anonymity as the inquiries are not public.
Advisers managing clients’ digital assets typically use a third party to store them.
SEC enforcement staff are asking investment advisers for details around what the firms did to assess custody for platforms including FTX, one of the sources said. The broad enforcement sweep, which has not been previously reported, is a sign the top U.S. markets regulator’s scrutiny of the crypto industry is expanding to more traditional Wall Street firms.
A spokesperson for the SEC declined to comment.
By law, investment advisers cannot have custody of client funds or securities if they do not meet certain requirements to protect the assets. One of these demands that advisers hold such assets with a firm deemed to be a “qualified custodian,” though the SEC does not hold any specific list or offer licenses to firms to become such custodians.
The SEC’s investigation signals the regulator is targeting a long-brewing issue for traditional firms that have sought ways to invest in crypto, attorneys told Reuters. The agency’s accounting guidance has made it too capital-intensive for many lenders to hold digital assets on behalf of clients, limiting options for advisers seeking custodians.
“This is an obvious compliance issue for investment advisers. If you have custody of client assets that are securities, then you need to custody those with one of these qualified custodians,” said Anthony Tu-Sekine, head of Seward and Kissel’s Blockchain and Cryptocurrency Group.
“I think it’s an easy call for the SEC to make.”
Under Democratic leadership, the SEC has made crypto a priority area for enforcement, nearly doubling the size of its crypto team last year. But the regulator is under fresh pressure to go after crypto in the wake of a series of bankruptcies across the industry and the unveiling of U.S. charges against FTX’s founder and former head, Sam Bankman-Fried, for allegedly committing fraud. He has pleaded not guilty.
Two of Bankman-Fried’s associates, former Alameda chief executive Caroline Ellison and former FTX chief technology officer Gary Wang, have both pleaded guilty to defrauding investors and agreed to cooperate.
The SEC has also been probing FTX equity investors for details of their due diligence efforts when they invested in the crypto exchange.
(Reporting by Chris Prentice in New York; Additional reporting by Elizabeth Howcroft in London and Hannah Lang in Washington; Editing by Megan Davies and Leslie Adler)
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
