SEC Calls on Firms to Disclose Exposure to Bankruptcies and Crypto Risks

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The United States Securities and Exchange Commission (SEC) has issued new guidelines that may require publicly traded companies to disclose their exposure to crypto assets.

In a statement released Dec. 8 by the SEC division of Corporation Finance, it said the recent upheaval in the crypto asset market has caused widespread disruption in these markets and noted that companies may have disclosure obligations under the federal securities laws to disclose whether these events could impact their business.

The SEC has also included a sample letter that would be sent to companies requesting additional information about the company’s exposure to crypto bankruptcies, crypto asset volatility, and any other significant crypto market developments.

The first question asks the company to disclose any material developments in the crypto asset market that could impact the company’s financial condition, earnings, or share price, including the impact of volatility. crypto asset prices.

Other questions ask the business to discuss how certain bankruptcies have or could impact the business, including whether one has experienced excessive redemptions or withdrawals or the extent to which assets cryptographics are used as collateral for loans.

It also asks the company to describe any material risks to the company resulting from changes in regulations relating to crypto assets, or risks incurred by the assertion of jurisdiction of US and foreign regulators or other entities. governments on crypto assets and crypto asset markets.

In the accompanying text, the SEC explained that it selectively reviews filings [] monitor and improve compliance with applicable disclosure requirements.

He noted that companies are already required to provide additional information if necessary to avoid misleading them.

Related: BlockFi Employees Discouraged From Describing Risks in Internal Communications: Report

To meet their disclosure obligations, companies should consider the need to reflect market developments in crypto assets in their filings, the agency added.

The SEC has been preparing for greater crypto oversight in recent months, opening new offices, a Crypto Assets Office and an Industry Applications and Services Office specifically for this purpose. The SEC and other agencies have recently come under fire for their lack of enforcement in high-profile cases.

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