SIFMA C&L Annual Conference for March 2023 – Focus on Crypto | Faegre Drinker Biddle & Reath LLP
The 2023 Securities Industry and Financial Markets Association (SIFMA) Compliance & Legal Annual Seminar, as usual, was well attended by compliance and legal professionals, including FINRA executives and SEC directors. The three-day event held, where skies outside San Diego were overcast and gray, also coincided with the run-up at SVB, and gloomy forecasts for Signature Bank and First Republic. Inside, industry leaders and regulators discussed legal trends on the horizon. Not surprisingly, there was a focus on crypto at this year’s conference. While Reg BI, ESG, off-channel communication, cyber security and the telltale banking issues (among others) were also hot topics discussed by industry insiders, here we focus on crypto. Below are some key takeaways.
Expect more SEC enforcement actions focused on crypto
SEC Director Gurbir Grewal noted the commission’s overall intent to focus on enforcement actions and quickly bring those actions to resolution as a way to rebuild public confidence in the markets, financial institutions and agencies. He also encouraged firms to self-report and emphasized the need for robust compliance programs, especially as new rules and regulations continue to be issued. He took the time to talk about crypto investments, noting that traditional firms generally “cannot and cannot” participate in this space due to a lack of compliance and clear rules around these investments. He also noted that the SEC is doubling the size of crypto assets and cyber entity to focus on crypto’s harm to investors; In fact, the SEC has already filed more than 100 enforcement actions related to crypto. A fact reflected on the “SEC Crypto Assets and Cyber Enforcement Actions” website.
Afterwards, FINRA will also have a crypto focus
FINRA also announced that it views crypto activities in terms of traditional broker-dealer activities. This is no surprise given last year’s announcement of a targeted exam regarding crypto assets. FINRA is also monitoring the related issue of “FinFluencers” and how broker-dealers use them to promote investments.
Securities litigation with a focus on crypto
Following the crypto theme, those in the know noted that 2022 saw a 50 percent increase in crypto-related enforcement actions over 2021. The industry also saw the SEC bring its first enforcement action alleging insider trading with respect to crypto. SEC v. WahiNo. 22-cv-1009 (WD Wash.) Aside from crypto, there was also an increase in SPAC litigation in 2022. In fact, reportedly 35 percent of securities cases in 2022 were related to either COVID, crypto or SPAC.
Perhaps the biggest takeaway is that 2023 is sure to see a lot of regulatory activity in the industry. If you haven’t reviewed your written supervisory procedures and your crypto-related training, now is the time to do so.
