SEC staff releases crypto asset sample comment letter

Sean C. Prince, Nicholas G. Topoll
| 12/16/2022
SEC staff releases crypto asset sample comment

An SEC sample letter encourages companies to consider the disclosure implications of exposure to crypto asset markets and market participants.

In under a minute

  • On Dec. 8, 2022, the Securities and Exchange Commission (SEC) Division of Corporation Finance (CorpFin) released a sample comment letter to companies reminding them of their disclosure obligations under federal securities laws.
  • The focus of the sample comment letter is on how recent crypto asset market events might have affected – either directly or indirectly – a company’s business. CorpFin encourages companies to evaluate their existing disclosures to determine if updates are warranted.
  • Companies should consider the sample letter comments and determine what, if any, changes are needed to disclosures to adequately address the impact of recent crypto asset market developments in their filings.
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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.

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Sean Prince
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Nic Topoll
Nicholas G. Topoll