Forex in this article
• SEC targets crypto exposures of publicly traded companies
• Disclosure Reminder
• Sample published letter
The bankruptcy of crypto exchange FTX has further clouded the bleak crypto year 2022. Worries over the risk of infection have further heightened risk aversion among crypto investors, with investors withdrawing capital at scale.
It’s not just crypto companies themselves that could face problems due to their financial dealings with FTX or associated trading house Alameda Research, companies in other industries could also be impacted by the global crisis. crypto market. If these are listed, they have a disclosure obligation, recalls the Securities and Exchange Commission SEC of the United States.
Transparency on possible consequences of exposure to crypto
“Recent bankruptcies and financial difficulties of participants in the crypto asset market have resulted in widespread disruption of these markets. Companies may have disclosure requirements under federal securities laws regarding the direct or indirect impact that these events and ancillary events have had on their business or may have,” the supervisors said in a letter.
The sample letter is intended to facilitate disclosure
The SEC included a sample letter in its reminder to publicly traded companies to help companies disclose “any material crypto asset market development” necessary to improve their business, financial condition, results of operations, or price. of the action since the last reporting period, including the consequences of price fluctuations of crypto assets, according to the authority in its model letter.
In this context, questions are being asked about the consequences that the bankruptcies of certain companies have or could have on their own activity. This applies in particular to assets that could not be recovered due to the bankruptcy of another company. In this context, the SEC also specifically named “excessive redemptions or suspended redemptions or withdrawals of crypto assets” or compliance violations that may have occurred.
Businesses that own, have issued, or hold crypto assets on behalf of third parties are also required to disclose whether those crypto assets serve as “collateral for loans, margin, re-mortgage, or other similar activities.” In this case, the authority requires more precise specifications and also wishes to know whether the assets have been deposited as collateral for loans.
The SEC also asks about possible reputational damage in its model letter. “For example, discuss how market conditions have affected how your business is perceived by customers, counterparties and regulators, and whether there are any material impacts on your operations or financial condition,” said the stock market watchdog.
SEC with spot checks
The SEC continues to selectively review filings “to monitor and improve compliance with applicable disclosure requirements.”
The agency has made increasing efforts to monitor the crypto market more closely in recent months. Especially since crypto geek Gary Gensler took over as SEC chairman in April 2021, possible market regulation by the stock exchange watchdog has been heavily discussed. Gensler himself recently showed his willingness to classify the largest cryptocurrency, Bitcoin, as a commodity, but he thinks all other coins should be classed as securities and “are therefore within the jurisdiction of the SEC.”
Additionally, the agency has added two new offices to the corporate finance division, one of which will deal exclusively with crypto assets.
editorial office finanzen.net
Image credits: Andrew Harnik/AP, Lukasz Stefanski/Shutterstock.com