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Breaking it down
On Dec. 8, 2022, CorpFin released a sample comment letter focused on the potential impact of recent developments in crypto asset markets on companies’ businesses. Such developments include (but are not limited to) the bankruptcy of a large crypto asset exchange and the financial distress of several key crypto asset market participants.
The sample comment letter provides example comments a company might receive from CorpFin related to how recent crypto asset market activity, including any exposure to crypto asset market participants, affects the company’s business. It also encourages companies to “consider the need to address crypto asset market developments in their filings generally, including in their business descriptions, risk factors, and management’s discussion and analysis.” All such disclosures should be “specific, tailored disclosure about market events and conditions, the company’s situation in relation to those events and conditions, and the potential impact on investors.”
CorpFin also urged companies to consider the sample comments in new filings not typically subject to staff review prior to their use, including automatically effective registration statements and prospectus supplements for shelf registration takedowns.
The sample comments cover the following areas:
- General
- Description of business
- Management's discussion and analysis of financial condition and results of operations
- Risk factors
Crowe observation: In addition to holding or issuing crypto assets – for either itself or its customers – a company should consider whether a crypto asset market participant and the company have a customer, vendor, lender, or borrower relationship. The sample CorpFin comment letter highlights the need for a company to consider broad exposures to crypto asset markets when identifying potential impacts to the company’s business and the need for enhanced disclosure.
