The Securities and Exchange Commission has issued an alert for all investors dealing with Crypto asset securities. The fact is that they have to be extremely cautious while carrying out any kind of investment in this sector. According to them, the entire scenario surrounding it happens to be very explosive, as well as unpredictable. The platform itself, where the investors carry out their activities of purchasing and selling or borrowing and lending of these very securities, actually has no real fool-proof method of preventing external threats from being controlled or done away with.
In their opinion, the investors are at all times exposed to a massive amount of risk. The general advice passed on is that the investments should be made with the money they can afford to lose, just so as to be prepared for the worst. This will help them in making faster recoveries in the case of a mishap or any other kind of unfortunate circumstance.
As per federal securities laws, an organization is not permitted to either provide or sell securities without it being registered with the SEC. In the case of brokers and dealers, or investment advisors, alternative trading systems (ATS), and others like them, need to either register themselves with the SEC or else a state regulator or any self-regulatory body, like FINRA. In order to be able to safeguard the investor’s interests while registering, it is necessary to divulge all relevant information with regard to the company’s activities, along with the offering, and the offered securities, to the public.
Also, in the case of registration, the issuer is required to submit their financial statement on which an audit needs to be done by a public accounting company, which happens to be registered with the Public Company Accounting Oversight Board (PCAOB). This will help to create further awareness for the investor regarding the firm he wants to deal with.
Likewise, in the case of brokers and dealers, as well as investment advisors, registering themselves provides the investor with a safety blanket through the laid-out rules such as custody of assets, as well as fees, and conflicts of interest, along with standards of conduct. Such individuals are also required to abide by the minimum capital needed. In the case of ATSs, it is necessary for them to be registered, as well as members of any SRO.
Investment advisors who manage the funds of their clients need to use a bank or a broker to safeguard them. In the case of securities trading platforms, or crypto exchanges which provide varied services, are also required to get all of their offered services registered separately. The investor’s interests also happen to be safeguarded by the Securities Investor Protection Corporation (SIPC).
On the whole, the Securities and Exchange Commission, through the alert, makes an investor become more familiar with all of the involved risk factors that he may not be totally aware of. The idea behind this important exercise is to make the investor prepared to be able to make the correct decisions, as well as remain alert regarding fraudsters and other expected threats. Also advised is for them to have something of an investment plan ready before taking the plunge.
