US SEC warns against recommending “virtual currency securities” to individual investors

“Difficult to understand product features and risks”

The U.S. Securities and Exchange Commission (SEC) released a bulletin for staff on the 20th. It urged financial experts to exercise “extreme scrutiny” when recommending complex or risky products to consumers.

Crypto assets (virtual currencies) are also included in “complex products and high-risk products”.

The SEC said that in the case of such products, it can be difficult to find reasonable grounds to believe they serve the best interests of individual investors. It is difficult to deeply understand the characteristics and risks of those products.

The SEC explained examples of products that should be thoroughly scrutinized:

Examples of products that may require a high degree of scrutiny include inverse or leveraged listed products, margin trading, derivatives, cryptocurrency securities, penny stocks, private placements, asset-backed securities, volatility linked listed products, and reverse convertible notes. There are, but not limited to,

As a premise, the SEC requires financial professionals, such as investment advisers, broker-dealers, to understand individual investors’ investment strategies and to believe that they are in the best interests of individual investors before advising them. .

He added that aside from understanding the investment product, it may also be necessary for the individual investor being advised to determine whether the product’s complexity and risk are acceptable.

However, even if an individual investor has a trading objective consistent with the product or has a tolerance for the risk of financial loss, the SEC will immediately consider the product to be in the investor’s “best interest.” We reserve the right not to become

There must be a “reasonable basis” to believe that it is in the best interest based on all relevant facts and circumstances.

What is the U.S. Securities and Exchange Commission (SEC)?

Established in 1934. Its purpose is to ensure fair trading and investor protection, and prevent insider trading, corporate fraudulent accounting, and market manipulation. It also determines whether virtual currency falls under the category of securities. SEC stands for “Securities and Exchange Commission”, and in Japan the “Securities and Exchanges Surveillance Commission” plays a similar role.

Cryptocurrency Glossary

SEC Regards Many Cryptocurrencies as Securities

The SEC has filed lawsuits for providing unregistered securities to exchanges, etc., alleging that most virtual currencies fall under the category of securities, as it named “virtual currency securities” in this notice to staff. rice field.

Also on the 17th, cryptocurrency exchange Bittrex and its former CEOs filed a lawsuit for providing securities trading, brokerage and clearing services without business registration.

Algorand, Dash (DASH), OMG (OMG) and other stocks allege securities.

connection: U.S. SEC sues virtual currency exchange Bittrex, claiming securitization of 6 stocks

Some lawmakers have criticized the move. House Financial Services Committee Chairman Patrick McHenry (Republican) has sent a letter to the SEC Chairman stating the opinion of all Republicans on the House Financial Services Committee.

The SEC has accused cryptocurrency trading platforms of forcing business registration without presenting a workable process. “The activities of digital asset companies do not include the offering of securities,” it said.

connection: “Cryptocurrency companies do not offer securities,” US lawmakers send letter to SEC chairman

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