SEC Disclosure Considerations Arising from Recent Developments in Crypto Asset Markets

Employees of the Corporate Finance Division at the United States Securities and Exchange Commission (SEC) have recently asked public companies about the disclosure of recent developments in the crypto asset markets, including recent bankruptcies and financial difficulties among crypto asset market participants. provided a guide.

The guidance generally states that public companies must provide specific, regular disclosures to investors about crypto market events and conditions, the company’s position in relation to those events and conditions, and the potential impact on investors, if they are to be understood. or business assessment be material. , the financial condition and results of operations, or the company’s share price.

The guidance notes that, as material or otherwise necessary, public companies should consider the need to address developments in the crypto asset market in their filings with the SEC, such as:

  • the material effects of developments in the crypto asset market, which may include a company’s exposure to counterparties and other market participants;
  • Risks related to the company’s ability and ability to obtain financing; and
  • risks related to legal proceedings, investigations, or regulatory effects on the crypto asset markets.
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The guidance reminds companies that they should assess whether they have experienced or are likely to be affected by issues related to developments in the crypto-asset market that are described as potential risks in their current disclosures and, if so, accordingly Update your disclosure.

The guidance includes a non-exhaustive list of disclosure considerations, as well as a sample letter that highlights the types of comments the SEC may elicit during its filing review process. Such comments may require changes or updates to company files in the following categories:

  • general impact on business;
  • business description;
  • Management Discussion and Analysis (MD&A); and
  • risk factors.
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Importantly, the guidance emphasizes that there is no standard form or set of disclosures that will ensure that a company meets its disclosure obligations, and that a company’s specific disclosure requirements will depend on its specific facts and circumstances. The breadth of disclosure listed by staff suggests that the guidance may also apply to companies that may not be directly involved in, but materially affect, the crypto markets. Companies preparing their periodic reports and/or registration statements should review the sample questions and consider whether disclosures in these categories should be updated.

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Leadership joins the SEC Personnel Accounting Bulletin 121 (SAB 121), which was published in April of this year, indicating increased scrutiny of public companies in the crypto space.

Especially after the collapse of Luna and FTX, and due to the current turmoil in the crypto asset markets, there is a good chance that the SEC and its staff will provide additional guidance to the crypto industry and closely monitor the crypto markets involved. next months. If you have any questions about the guide or other crypto or general corporate matters, please contact a member of Wilson Sonsini. fintech and financial services or public company representation practices

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