SEC proposes new protections for crypto assets
On February 15, the SEC proposed new rules to enhance protections for customer assets, including cryptocurrency assets, managed by registered investment advisers. (See also SEC Fact Sheet here.) The proposed rules would implement measures under the Investment Advisers Act of 1940 to address how client assets are safeguarded, and would broaden the definition of “asset class” to ensure investment advisers are protecting not only their clients’ securities and funds but also “other positions held in a client’s account,” including crypto assets.
Under the proposed rules, investment advisers would be required to, among other things, segregate such crypto assets into separate accounts for safekeeping, prevent commingling of assets with the adviser’s or another related persons’ assets, and place crypto assets with a qualified custodian such as a federal or state-chartered bank or savings association, a registered broker-dealer or futures commission merchant, or certain foreign financial institutions. Foreign financial institutions would have to adhere to enhanced requirements to serve as a qualified custodian.
In a statement accompanying the release of the proposed rules, SEC Chairman Gary Gensler stated that “advisers who trade an investor’s assets cannot circumvent the custody rule and the safeguards it provides.” Gensler added that the proposal would impose several recordkeeping requirements, and require, for the first time, that advisers and qualified custodians enter into written agreements to help guarantee that customer assets are being protected.
Comments on the proposed rules are due 60 days after publication in the Federal Register.