Cryptocurrencies have become the focus of the Securities and Exchanges Commission (SEC), which is still on the warpath. As part of the latest effort, the Edict is aimed at companies that are publicly listed and have any exposure to the assets or industries in question.
There has been a substantial disruption in the crypto asset market as a result of recent bankruptcies and financial distress, as claimed in the SEC’s latest announcement.
Depending on the circumstances, a company may need to make a disclosure under federal securities laws with regard to the direct or indirect impact that these events and collateral events have had or may have on their business in the future.
The Division of Corporation Finance member of the American Institute of Financial Research believes that companies should evaluate their disclosure policies with the goal of providing investors with specific, tailored information regarding market conditions and events, and the potential impact it may have on investors.
Those companies that are required to make ongoing disclosures should consider whether their existing disclosures need to be updated in order to meet these obligations.
In order to monitor and enhance compliance with disclosure requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934, the Division selectively reviews filings. Additionally, companies are required to disclose such additional material information, if any, as may be necessary for them to make the required statements that are not misleading in light of the circumstances under which they are made.
This includes, in addition to, the information explicitly required to be included in a statement or report.
It is recommended that companies evaluate whether they have been affected by matters characterized as potential risks in the past or may do so in the future and, if this is the case, update their disclosures in accordance with the announcement.
As part of the Division’s guidelines, companies are encouraged to consider the sample comments provided in the letter when preparing disclosure documents that may not be reviewed by the Division prior to their use.
These include automatically effective registration statements and prospectus supplements for the use of shelf registration statements that have been taken down.
This is yet another indication the government is looking at monitoring this industry as a result of the SEC’s request for companies to disclose all of their crypto activities. Even though it appears that banks are trying to protect users and their funds, it does not appear that this is going to be able to help the market in any way.