SEC issues new guidance requiring companies to disclose cryptocurrency risks

An outside view of the US Securities and Exchange Commission (SEC) headquarters in Washington.

Jonathan Ernst | Reuters

The Securities and Exchange Commission published new guidance on Thursday, requiring securities issuers to disclose to investors about their exposure and risk to the cryptocurrency market. .

This guidance comes about a month after FTX, one of the world’s largest cryptocurrency exchanges, filed for bankruptcy after lending money to an established risky trading firm. by former CEO of FTX, Sam Bankman-Fried. More than 100,000 customers were affected by the exchange’s failure.

On Wednesday, SEC Chairman Gary Gensler against the accusations that the agency has failed to prevent crypto companies from misusing customer funds. Gensler also said the SEC will take more enforcement action if companies fail to comply with applicable rules.

Under the new guidance, companies will have to include their crypto asset holdings as well as their risk for FTX bankruptcy and other market developments in their public filings. Of the company bankruptcy filing The company has more than 1 million creditors.

The SEC’s Corporate Finance Division developed a sample letter after selectively reviewing the findings made under the Securities Act of 1933 and the Securities Exchange Act of 1934, instructing companies to disclose “other material information, if any, if necessary to make the statements requested, in the circumstances in which they are made, that are not misleading,” according to the guidelines.

A proposed entry in the letter requires the issuer to describe the company’s bankruptcy and subsequent impacts that “have affected or may have affected its business, financial condition, customer and your partner, directly or indirectly.” Another asked for a description of “any significant risk to you, directly or indirectly, from redemption, overdrawing, or suspension of redemption or withdrawal of assets cryptocurrencies. Identify any significant levels of risk and quantify any significant risks.”

The SEC’s corporate finance division has encouraged companies to adopt these recommendations as they prepare documents that “may not be reviewed by the Division prior to use.”

Things you should know before investing in cryptocurrencies


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