Digital assets, such as cryptocurrencies and initial coin offerings (ICOs), generally share the following features:
- A virtual currency/token/coin is a digital representation of value that can be digitally traded and functions as a medium of exchange, unit of account, or store of value;
- A virtual currency exchange is a person or entity that exchanges virtual currency for fiat currency, funds, or other forms of virtual currency. Exchanges typically charge fees, and secondary trading may occur. These exchanges are generally not registered securities exchanges or alternative trading systems subject to federal securities laws.
- Virtual tokens/coins may be issued by a virtual organization or capital-raising entity;
- Digital assets may or may not be considered securities or commodities products, and may be unregulated;
While not yet categorically deemed as securities, certain digital asset transactions and holdings may yet be subject to transactional reporting.
POLICY
Registered persons are permitted to purchase digital assets for personal use. Generally, such assets are held in a digital wallet, and are not subject to reporting. However, some trading platforms allow for the purchase or sale of digital assets, which can subject those holdings to reporting. Therefore, ESI’s policy is that digital assets held in a brokerage account are reportable assets, and such transactions must be reflected in your outside brokerage account(s) transaction history. As a reminder, outside brokerage accounts (i.e. those held at firms other than ESI) must be disclosed prior to opening and are reported through Star Compliance. To receive approval to open an outside account, complete the Authorization to Provide Account Information form and email it to ESICompliance@nationallife.com. Upon approval, the account will be added to your Star Compliance profile.
If you hold a brokerage account at a firm with which ESI does not have an automated data feed, please work with Ben Zarzycki in ESI Compliance (see contact info below) to ensure ESI receives duplicate copies of your monthly/quarterly account statements.
Note: Investment adviser representatives subject to quarterly transaction reporting and who hold digital assets in a reportable brokerage account will be required to either:
- validate that their digital transactions carry through via an automated data feed (if their account is set up for such a feed),
- manually enter their transactional information into Star in conjunction with each reporting period, or
- attach statements to their quarterly transaction report.
TRADING digital assetS in client accounts is prohibited
As a reminder, ESI does not permit the purchase or sale of digital assets in client accounts. Additionally, the NFS trading platform currently does not support transactions in digital assets.
QUESTIONS
If you have questions about outside brokerage accounts, automated data feeds, reportable transactions, or the process for obtaining approval for an outside account, contact Ben Zarzycki at 802-229-3659 or bzarzycki@nationallife.com.
CLICK HERE TO VIEW FIELD NOTICE 2021-17: DIGITAL ASSETS IN OUTSIDE ACCOUNTS
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