SEC issues guidance for disclosing crypto-asset risks
Recently, the SEC's Division of Corporation Finance issued guidance accompanied by a illustrative letter containing sample comments that the Division may issue to companies following the recent “widespread disruption” in the crypto asset markets. The Division said it “believes that companies should evaluate their disclosures with a view towards providing investors with specific, tailored disclosure about market events and conditions, the company’s situation in relation to those events and conditions, and the potential impact on investors.” Companies with ongoing reporting obligations “should consider whether their existing disclosures should be updated.”
The sample comments, which are not exhaustive, are designed to help companies meet their disclosure obligations by “consider[ing] the need to address crypto asset market developments in their filings generally, including in their business descriptions, risk factors, and management’s discussion and analysis.” The Division urged companies to “take these sample comments into consideration” as they prepare disclosure documents that may not typically be subject to review by the Division before their use, such as automatically effective registration statements and prospectus supplements for takedowns from existing shelf registration statements.
The sample comments “focus on the need for clear disclosure about the material impacts of crypto asset market developments, which may include a company’s exposure to counterparties and other market participants; risks related to a company’s liquidity and ability to obtain financing; and risks related to legal proceedings, investigations, or regulatory impacts in the crypto asset markets.”