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The U.S. Securities and Exchange Commission’s former head of internet enforcement, John Reed Stark, has raised concerns about Morgan Stanley’s 15,000 financial advisors promoting cryptocurrency investments, citing risks to retail investors and potential career consequences for advisors. He warned that the advisors could risk their Certified Financial Planner credentials if they fail to adhere to regulatory standards.
Concerns Raised Over Morgan Stanley’s Promotion of Cryptocurrency Investments
Former U.S. Securities and Exchange Commission (SEC) official John Reed Stark expressed his concerns on social media platform X on Wednesday regarding the potential risks Morgan Stanley’s financial advisors face by promoting cryptocurrency investments. Stark is currently president of cybersecurity firm John Reed Stark Consulting. He founded and served as chief of the SEC Office of Internet Enforcement for 11 years. He was also an SEC enforcement attorney for 15 years.
Morgan Stanley is reportedly allowing its 15,000 financial advisors to pitch shares of two spot bitcoin exchange-traded funds (ETFs) to select clients, starting this week. The former SEC internet enforcement chief noted that these advisors can now recommend Blackrock’s Ishares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC) to qualified investors. He cautioned:
This is a mammoth risk not just for Morgan Stanley’s retail investors (because the risk associated with crypto-asset investments is literally beyond measure) but this is also an extraordinary personal risk for some Morgan Stanley’s advisors themselves, who could lose their credential as Certified Financial Planners (CFPs).
The CFP Board, which oversees and enforces the CFP credential, recently updated its Sanction Guidelines, Fitness Standards, and Procedural Rules as of July 1. These guidelines stress that while CFP professionals can provide financial advice on cryptocurrency-related assets, they must do so with extreme caution, Stark explained. The Board’s notice details the unique risks and uncertainties of these assets, including potential future regulation. Advisors are urged to be competent in offering such advice, considering the specific attributes of crypto-assets.
The former SEC official concluded:
For any CFP planning to peddle crypto-assets, fail not at your peril. The CFP Board’s Enforcement Department is watching and with one phone call can find out exactly what you are up to. Do not take the get-rich-quick-bait and risk your career. Just say no.