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Exterior of the U.S. Securities and Exchange Commission (SEC) headquarters in Washington.
Jonathan Ernst | Reuters
The Securities and Exchange Commission released new guidance on Thursday, requiring companies that issue securities to disclose to investors their exposure and risks to the cryptocurrency market.
The guidance follows one of the world’s largest cryptocurrency exchanges, FTX, filing for bankruptcy after lending customer money to a high-risk trading firm founded by former FTX CEO Sam Bankman-Fried. It was announced about a month later. Over 100,000 customers were affected by the exchange outage.
On Wednesday, SEC Chairman Gary Gensler dodged the accusation It failed to prevent cryptocurrency companies from misusing customer funds. Gensler also said the SEC will take more enforcement action if companies fail to comply with existing rules.
Under the new guidance, companies must include the risk of FTX bankruptcy and other market developments in their public filings in addition to holding crypto assets.Company’s filing for bankruptcy Indicates that the company has more than 1 million creditors.
The SEC’s Corporate Finance Division prepared the sample letters after selectively reviewing the results of investigations conducted under the Securities Act of 1933 and the Securities Exchange Act of 1934. According to the guidance, required statements should be made in light of the circumstances in which they are made and not misleading.
Suggested items in the letter describe how the company’s bankruptcy and its ensuing effects “directly or indirectly affected or could affect your business, financial situation, customers, and business partners.” Another asked the issuer to explain whether or not the excessive redemption, withdrawal, or suspension of redemption or withdrawal of cryptocurrency will result in any direct or indirect consequences to you. Material Risks: Identify material concentrations of risk and quantify material exposures.”
The SEC’s Corporate Finance Division has encouraged companies to adopt these recommendations when preparing documents that “generally may not be subject to review by the finance department prior to use.”
