The Securities and Exchange Commission (SEC), has released new guidelines for financial disclosures. They require companies to keep a better record of their exposure in crypto market turmoil.
The guidelines are listed in a sample letterGo beyond the mere amount Balance sheet cryptocurrencies.
The letter also includes guidelines on exposure to third-party crypto market participants, risks related to firms’ liquidity, their ability to obtain financing, as well as risks relating to “legal proceedings, investigations, or regulatory impacts” within the crypto markets.
The Securities Act Rule 408 (Exchange Act Rule 12b-20) were cited by the regulator to explain the new guidelines. These rules states that companies may need to make additional disclosures “as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.”
Firms were also urged to discuss the “downstream effect” of how the bankruptcies of certain third-party companies have affected their company as well as their partners and customers.
More broadly, the letter asked firms to disclose any “reputational harm” they may face as a result of recent market disruption.
SEC guidelines after market chaos
The announcement comes as many companies have faced severe difficulties due to exposure to insolvent crypto firms.
Gemini, a cryptocurrency exchange, had to cease withdrawals Gemini Earn service This is a direct result from the liquidity problems experienced by Genesis, a crypto broker.
Gemini Earn offered customers interest for depositing cryptocurrencies. It ranged from 0.45% to 8.5%. Facilitated By using Genesis as a third party lending party.
The SEC’s letter touches on events like Gemini and Genesis.
The regulator also recommended firms detail any risks involved in “excessive redemptions or withdrawals,” having “suspended redemptions or withdrawals,” as well as any risks stemming from “unauthorized or impermissible customer access” to their offerings outside of the jurisdictions they are authorized to operate in.