The SEC’s prosecution of chief compliance officers remains a fraught and controversial topic. A recent SEC enforcement settlement with a CCO and a registered investment adviser could raise even more questions about the role of CCOs and what standards the SEC uses in sanctioning them.
New, sweeping bipartisan legislation proposes to define the contours of regulating digital assets and the crypto industry. Among other things, the bill:
- Gives the CFTC primary jurisdiction over digital assets and exchanges, limiting the SEC’s ability to regulate the industry;
- Calls for federal and state cooperation in monitoring and regulating the various aspects of the industry, including tax and money transmitter issues; and
Includes a number of measures designed to address cybersecurity and ESG concerns.
Recently the SEC indicated that advisory firms should have policies and procedures in place to ensure that electronic signatures are not being exploited to perpetrate fraud that could harm advisory clients.
To that end there are various methods that can be employed to ensure that the person receiving the request for electronic signature is the intended recipient/signer. Among other things, the recipient can be required to authenticate their identity before reviewing/signing the document through various methods including
- the sending of a code via text to a mobile number that the sender already has on file prompting the recipient to enter the validation code to confirm its identity
- requiring the recipient to answer questions about the recipient’s identity/background to validate that the recipient is the intended signer.
Advisers should utilize only those electronic signature services that have a validation method, such as the above, to authenticate that the person signing the document is the intended recipient/signer.
Last week, California and New Jersey both upped the ante in the nationwide race to write the rules for the crypto industry:
- The California Department of Financial Protection and Innovation published an Invitation for Comments related to issues impacting blockchain and crypto businesses.
- The New Jersey State Assembly Financial Institutions and Insurance Committee approved bills that would require licenses for digital assets businesses and establish a crypto regulatory scheme.
- Players in the blockchain and digital asset industry should take advantage of opportunities to help shape the evolving regulatory landscape, such as by responding to the Invitation for Comments.
The US Department of Justice and Federal Bureau of Investigation announced the first-of-its kind indictment of an “insider trading” scheme involving non-fungible tokens (or NFTs).
- A former employee of an online marketplace for NFTs allegedly used confidential business information for personal financial gain.
- The charged individual used new blockchain technologies to conceal the proceeds of the alleged illicit activity.
- The DOJ brought charges without characterizing NFTs as securities.