SEC, FINRA address digital asset securities compliance requirements
On July 8, the SEC and the Financial Industry Regulatory Authority (FINRA) issued a joint statement in response to compliance questions received from broker-dealer participants who handle digital asset securities. While recognizing that the application of federal securities law and FINRA rules to digital asset securities, as well as related innovative technologies, “raise novel and complex regulatory and compliance questions and challenges,” the joint statement encourages “reasonably practicable” efforts to address these issues. Among other things, the guidance emphasizes that broker-dealer participants who try to maintain custody of clients’ digital asset securities must comply with the SEC’s Customer Protection Rule to safeguard customers’ assets and prevent investor loss or harm. In situations involving noncustodial digital asset securities activities, relevant laws, rules, and requirements must also be followed, even if these activities generally do not raise the same level of concern. The SEC and FINRA also acknowledge that compliance with these rules may be challenging as technological enhancements and situations unique to digital asset securities continue to develop, and emphasize that they will continue to engage with broker-dealer participants as the marketplace evolves.