The U.S. Securities and Exchange Commission (SEC) is pressing publicly-listed companies to fulfill their disclosure obligations in the context of the recent turmoil in the crypto market. SEC's Division of Corporation Finance (DCF) wants firms to evaluate their exposure and share information about its potential impact on their businesses and investors.
Apart from the details explicitly required to be included in the filing, companies are obligated to disclose "such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading." DCF remarks that it selectively reviews reports and monitors compliance.
In the note on the SEC's website, DCF shares an exemplary letter with sample comments that may be sent to selected companies. In general terms, the institution wants businesses to disclose "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."
Sample comments are illustrative and by no means exhaust the list of issues to consider for disclosure. However, approximately half of the letter's content is, understandably enough, focused on risk factors, containing DCF's suggestions relating to potentially relevant types of risks companies may want to disclose. They include risk due to excessive redemptions and withdrawals of crypto assets or suspension thereof, reputational harm, business risks from possible regulatory developments related to crypto assets and crypto markets, and many more.
For more information on issues attracting DCF's attention, check the SEC's notice.
