Blockchain News

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

The corporate finance division of the Securities and Exchange Commission reminded companies of disclosure requirements and provided guidance on what else they needed to know.

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

The SEC’s Division of Corporation Finance stated in a statement released on December 8 that the recent upheaval in the crypto asset market has “caused widespread disruption,” and that companies may have disclosure obligations under federal securities laws to disclose whether these events could have an impact on their business.

The SEC has also included an example letter that would be sent to companies inquiring about their exposure to crypto bankruptcies, crypto asset volatility, and any other significant crypto market development.

The first question requests that the company disclose any “significant crypto asset market developments” that may have an impact on the company’s financial condition, results, or share price, including the impact of crypto asset price volatility.

Other questions ask the company to explain how certain bankruptcies have impacted or may impact the business, such as whether there have been “excessive redemptions or withdrawals” or the extent to which crypto assets are used as collateral for loans.

The sample letter also asks the company to describe any material risks to the business posed by regulatory developments relating to crypto assets, as well as risks posed by the assertion of jurisdiction over crypto assets and crypto asset markets by US and foreign regulators or other government entities.

The SEC explained in the accompanying text that it “selectively reviews filings […] to monitor and enhance compliance with applicable disclosure requirements.”

Companies are already required to provide additional information as needed to avoid misleading investors, according to the report.

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