- Morgan Stanley permits its 15,000 advisers to recommend Bitcoin ETFs, sparking potential for significant regulatory reviews.
- John Reed Stark, former SEC official, predicts this move will trigger the largest SEC and FINRA sweep in history.
Morgan Stanley, has now allowed its financial advisers to recommend Bitcoin ETFs to their clients, potentially leading to heightened regulatory scrutiny.
Morgan Stanley’s Death Wish
I worked in the SEC Enforcement Division for almost 20 years, the last 11 as Chief of the SEC’s Office of Internet Enforcement, and I have taught advanced securities regulation courses at both Georgetown and Duke Law Schools for 20 years — and my…
— John Reed Stark (@JohnReedStark) August 9, 2024
This was highlighted by John Reed Stark, a former U.S. SEC official, who shared his concerns on the social media platform X on August 9.
“By unleashing its legion of 15,000 brokers to pitch Bitcoin, Morgan Stanley has just voluntarily subjected themselves to what will likely become the largest SEC and FINRA examination sweep in history,” Stark wrote in an Aug. 9 X statement.
Stark indicated that Morgan Stanley’s decision might prompt one of the broadest regulatory examinations by the Financial Industry Regulatory Authority (FINRA) ever conducted.
“This resplendent, abundant and easily accessible treasure trove of evidence will be available to the SEC and FINRA not only with the click of a mouse in the form of a request for documents or testimony, but also upon demand during an on-site surprise ‘for-cause’ inspection. ”
He indicated that the decision opens up the firm’s operations to intense scrutiny, allowing regulators easy access to a wide range of internal communications that pertain to the sales of Bitcoin ETFs. This could include documents, emails, and even detailed phone call records, which could be obtained during routine audits or specific regulatory inquiries.
“Identifying violations will be like shooting fish in a barrel. So whoever Morgan Stanley’s current compliance director is — well, good luck with that,” Stark added.
Industry observers, including Haseeb Qureshi of Dragonfly, a cryptocurrency venture fund, anticipate that this new stance by Morgan Stanley might catalyze further investments into Bitcoin.
They speculate that the approval could result in a significant uptick in investment inflows into these ETFs by the end of the year, as traditional investors increasingly engage with digital assets through regulated avenues.
Morgan Stanley reflects a growing trend among traditional financial institutions to integrate cryptocurrencies into their offerings.
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