SEC and Digital Asset Securities - Requesting Comments after Enforcement Action

Last week, the SEC requested comments for innovation surrounding Digital Asset Securities, and their purchase by Broker Dealers. This comes after an enforcement action by the SEC against Ripple Labs and two executives for a $1.3Bn offering in unregistered digital asset securities.

The complaint alleges that the defendants failed to register their offers and sales of XRP or satisfy any exemption from registration, in violation of the registration provisions of the federal securities laws.

The Commission and its staff are also looking to gain additional insight into the evolving standards and best practices with respect to custody of digital asset securities. Currently, "for a period of five years, a broker-dealer operating under the circumstances set forth in the statement will not be subject to a Commission enforcement action on the basis that the broker-dealer deems itself to have obtained and maintained physical possession or control of customer fully paid and excess margin digital asset securities for the purposes of paragraph (b)(1) of Rule 15c3-3. These circumstances, among other things, include that the broker-dealer limits its business to digital asset securities, establishes and implements policies and procedures reasonably designed to mitigate the risks associated with conducting a business in digital asset securities, and provides customers with certain disclosures regarding the risks of engaging in transactions involving digital asset securities."