SEC Issues Statement and Requests Comment Regarding the Custody of Digital Asset Securities

      The SEC recently issued a statement and request for comment regarding the custody of digital asset securities by broker-dealers in order to encourage innovation around the application of Securities Exchange Act Rule 15c3-3 to digital asset securities.

      The statement sets forth the SEC’s position that, for a period of five years, a broker-dealer operating under the circumstances set forth in the statement will not be subject to a Commission enforcement action on the basis that the broker-dealer deems itself to have obtained and maintained physical possession or control of customer fully paid and excess margin digital asset securities for the purposes of paragraph (b)(1) of Rule 15c3-3.

      The five-year period is designed to provide market participants with an opportunity to develop practices and processes that will enhance their ability to demonstrate possession or control over digital asset securities. It also will provide the SEC with experience in overseeing broker-dealer custody of digital asset securities to inform further action in this area.

      The SEC lays out nine criteria for the circumstances under which a broker dealer will not be subject to an enforcement action; including, among other things, that the broker-dealer limits its business to digital asset securities, establishes and implements policies and procedures reasonably designed to mitigate the risks associated with conducting a business in digital asset securities, and provides customers with certain disclosures regarding the risks of engaging in transactions involving digital asset securities.

      The list of circumstances and caveats may place reliance on the SEC’s statement out of reach for most broker dealers, but it nonetheless shows the SEC’s policy is evolving with respect to the agency’s oversight of digital asset securities.

      Previous post Next post

      More like this

      30-Day Extension for Filing Annual Reports for Certain Broker-Dealers

      On February 12, the SEC extended the deadline for certain smaller broker-dealers to file their annual reports by 30 calendar…
      Read more

      FINRA Proposes Changes to its Private Placement Filing Requirements to Include Retail Communications

      FINRA recently submitted a proposal to amend FINRA Rule 5122 ("Private Placements of Securities Issued by Members") and FINRA Rule…
      Read more

      The State of New York Approves Mandatory Registration Requirements for IA Representatives

      Commencing February 1, 2021, New York state is mandating enhanced examination and registration requirements for natural persons representing investment advisors.…
      Read more

      CFTC Staff Provides Limited Continuation of Certain No-Action Relief

      The Market Participants Division (MPD) and the Division of Market Oversight (DMO) of the CFTC recently announced extensions to temporary…
      Read more

      NFA Notice to Members I-21-02

      In NFA Notice to Members I-21-02, the NFA reminds its Members who claim an exemption from CPO registration must annually…
      Read more

      FinCEN Extends Comment Period for Certain Convertible Virtual Currency & Digital Asset Transactions

      The Financial Crimes Enforcement Network (FinCEN) recently announced it is reopening the comment period for its recent proposed rulemaking regarding…
      Read more