Statement Summary
The SEC’s Division of Corporation Finance has issued guidance on the disclosure requirements for crypto asset exchange-traded products (ETPs). These ETPs, which are investment products traded on national exchanges, must adhere to federal securities laws, including registration under the Securities Act of 1933 and the Securities Exchange Act of 1934. The statement highlights critical disclosure areas such as risk factors, business descriptions, management identity, and financial statements. It emphasizes the necessity for clarity and adaptability in disclosures based on individual issuer circumstances, while also confirming the absence of certain registrant requirements that apply to investment companies. The guidance aims to protect investors and ensure efficient market practices. The Division encourages issuers with inquiries or requests for assistance to reach out directly.
Original Statement
As part of an effort to provide greater clarity on the application of the federal securities laws to crypto assets, the Division of Corporation Finance is providing its views on the application of certain disclosure requirements under the federal securities laws to offerings and registrations of securities by issuers of crypto asset exchange-traded products (“crypto asset ETPs”).
Crypto asset ETPs are investment products that are listed and traded on national securities exchanges. They are typically structured as trusts that hold assets which consist of spot crypto assets or derivative instruments that reference crypto assets. These trusts are issuers of securities who must register their offerings and classes of securities under the Securities Act of 1933 and Securities Exchange Act of 1934, respectively. Issuers of crypto asset ETPs are also subject to the anti-fraud provisions of the federal securities laws. However, the crypto asset ETPs addressed in this statement are not registered as investment companies under the Investment Company Act of 1940.
Disclosure Requirements
The disclosures required in connection with offerings and registrations under the Securities Act and the Exchange Act protect investors, facilitate capital formation, and promote fair, orderly, and efficient markets. In recent years, issuers have registered offerings of crypto asset ETPs under the Securities Act and registered classes of these securities under the Exchange Act. This statement reflects our observations regarding disclosure practices in our reviews of crypto asset ETP filings. It also addresses our views about certain specific questions that market participants have presented to the staff.
While disclosures should be based on an issuer’s specific facts and circumstances, we believe that issuers may benefit from the identification of common issues we have observed during our reviews. This statement addresses our views about certain disclosure requirements set forth in Regulation S-K and Regulation S-X as they apply to Securities Act registration forms (such as Form S-1). This statement does not address all material disclosure items, and the disclosure topics addressed below may not be relevant for all issuers. Each issuer should consider its own facts and circumstances when preparing its disclosures.
Key Disclosure Areas
- Risk Factors: SEC rules require a discussion of the material factors that make an investment in the issuer and product speculative or risky.
- Description of Business: Issuers must provide a narrative description of the material aspects of their business, including the characteristics of the underlying crypto asset(s).
- Management: Disclosure of information relating to the identity and experience of those entrusted with the management of the issuer, including executive officers and directors.
- Financial Statements: Issuers are required to provide financial statements of the trust or partnership, as well as separate financial statements of each individual series.
Contacting the Division
The Division welcomes questions about the application of the SEC’s disclosure rules to offerings and registrations of crypto asset ETPs, as well as any ongoing reporting obligations. We also welcome requests for other assistance (including requests for interpretive or no-action letters) relating to these issues and questions. Information about how to contact the Division is available on our website.
