In response to the recent market chaos, the Securities and Exchange Commission (SEC) has released new rules for firms making financial disclosures that require them to provide a more thorough record of their exposure to the crypto industry.
The regulations, which are listed in a sample letter, cover more than just the quantity of cryptocurrencies listed on the balance sheet.
Guidelines are also provided in the letter regarding exposure to third-party crypto market participants, liquidity risks for firms, financing risks for firms, and risks associated with “legal proceedings, investigations, or regulatory impacts” within the crypto markets.
The regulator cited Exchange Act Rule 12b-20 and Securities Act Rule 408 when describing the most recent guidelines. Companies may be required to provide additional disclosures “as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading” according to these rules.
Firms were also urged to talk about the “downstream effect” of how their company, as well as their partners and customers, have been impacted by the bankruptcy of some third-party companies.
In a broader sense, the letter prompted firms to reveal any “reputational harm” that might result from recent market disruption.
