Broker-dealer license delay: SEC, FINRA comments

Posted 09 July, 2019

The Financial Industry Regulatory Authority in tandem with the US Securities and Exchange Commission has explained the reasons behind delays in the consideration of the broker-dealer applications filed by cryptocurrency companies. The document was released on the SEC website on July 8.

FINRA and SEC stated that the players must clearly realize that application of federal securities law, FINRA guidelines and crypto rules can entail new and more complicated regulatory issues.

"The ability of a broker-dealer to comply with aspects of the Customer Protection Rule is greatly facilitated by established laws and practices regarding the loss or theft of security, that may not be available or effective in the case of certain digital assets," as the document states.

The authorities cooperate with the crypto market striving to settle down a number of controversial points.

Specifically, they are concerned about the fact that a broker-dealer cannot prove the wallet private key is not held by a 3rd party. Although a broker-dealer is said to own closed key, it is not enough to authorize that broker-dealer to cancel wrong or unapproved transactions. 

"It [broker-dealer] may not be able to demonstrate that no other party has a copy of the private key and could transfer the digital asset security without the broker-dealer’s consent," the regulators noted.

Another point of concern is that brokers can face problems with audits and reports.

"The broker-dealer’s difficulties in evidencing the existence of these digital asset securities may, in turn, create challenges for the broker-dealer’s independent auditor seeking to obtain sufficient appropriate audit evidence when testing management’s assertions in the financial statements during the annual broker-dealer audit."

However, both authorities are open for cooperation with crypto companies though only in case of the latter's fulfilment of all requirements.

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10 July, 2019 11:52

← Fortress ready to buy claims of Mt Gox creditors at $900

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Fortress ready to buy claims of Mt Gox creditors at $900

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09 July, 2019 13:34

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