Morgan Stanley, the largest wealth manager in the United States, could face intense compliance scrutiny after allowing its entire team of financial advisers to start pitching spot Bitcoin exchange-traded funds (ETFs), warns crypto skeptic John Reed Stark, a former US Securities and Exchange Commission official.
“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.
“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.
Regulators will have extensive access to documents
Stark explained that compliance staff and enforcement staff from both the SEC and the Financial Industry Regulatory Authority (FINRA) will have immediate access to all records, documents, emails, texts, voicemails and phone conversations related to Morgan Stanley’s Bitcoin (BTC) sales to retail investors.
“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. ”
Stark called the move “Morgan Stanley’s death wish.”
The criticism comes after a person familiar with the matter told Cointelegraph on Aug. 7 that Morgan Stanley authorized its 15,000 financial advisers to start recommending spot Bitcoin ETFs to high-net-worth clients.
Morgan Stanley only endorsing two Bitcoin ETF products
The individual, who was not permitted to discuss the issue publicly, confirmed an earlier CNBC report that Morgan Stanley plans to begin recommending Bitcoin ETFs.
Currently, the firm is only endorsing two products: BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund, but crypto industry commentators believe it will be significant for Bitcoin.
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“Expect to see some chunkier inflows in the second half of the year,” Crypto venture fund Dragonfly managing partner Haseeb Qureshi wrote on X.
“Can you imagine how big this is?” The DeFi investor added.
Since spot Bitcoin ETFs were approved on Jan. 11, they have attracted $17.3 billion in inflows, according to Farside data.
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