The United States Securities and Exchange Commission (SEC) is targeting investment advisers for potentially offering custody of digital assets to their clients without meeting proper criteria.

Citing three unnamed sources, Reuters reported that the Commission is investigating efforts by advisers to follow rules on the custody of clients’ digital assets after the FTX implosion.

The investigation has yet to be made public, but SEC enforcement staff have sought details from investment advisers about the steps they took to assess custody of the platforms, including the now-bankrupt cryptocurrency exchange, according to one. of sources Typically, customer digital assets are stored with a third party. Investment advisers cannot have custody of client funds or securities if they do not meet certain requirements designed to protect assets. The SEC is not licensed, but advisors who hold such assets with a company must be classified as “qualified custodians.” Investment advisers must also disclose to clients how their assets are held. The Commission has already doubled down and devoted more resources to its crypto team, the Crypto Assets and Cyber ​​Unit, which was previously known as the Cyber ​​Unit. The latest move could signal increasing scrutiny from the regulator amid the expansion of traditional Wall Street firms into crypto. Anthony Tu-Sekine, head of Seward and Kissel’s Blockchain and Cryptocurrency Group, was quoted as saying:

“This is an obvious compliance issue for investment advisers. If you have custody of client assets that are securities, then you must keep them in custody with one of these qualified custodians.”

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