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Dec. 8, 2022
Recent bankruptcies and financial distress among crypto asset market participants have caused widespread disruption in those markets. Companies may have disclosure obligations under the federal securities laws related to the direct or indirect impact that these events and collateral events have had or may have on their business. The Division of Corporation Finance believes that companies should evaluate their disclosures with a view towards providing investors with 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. Companies with ongoing reporting obligations should consider whether their existing disclosures should be updated.
The Division selectively reviews filings made under the Securities Act of 1933 and the Securities Exchange Act of 1934 to monitor and enhance compliance with applicable disclosure requirements. In addition to the information expressly required to be included in a statement or report, companies must disclose “such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.” [2] The following illustrative letter contains sample comments that the Division may issue to companies depending on their particular facts and circumstances. In meeting their disclosure obligations, companies should 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. To assist companies in meeting these obligations, the sample comments below focus on the need for clear disclosure about the material impacts of crypto asset market developments, which may include a company’s exposure to counterparties and other market participants; risks related to a company’s liquidity and ability to obtain financing; and risks related to legal proceedings, investigations, or regulatory impacts in the crypto asset markets.
The sample comments do not address an exhaustive list of the issues that companies should consider. As always, companies should evaluate whether they have experienced or may be affected by matters characterized as potential risks and, if so, update their disclosures accordingly. Any comments issued would be appropriately tailored to the specific company and/or transaction, and would take into consideration the disclosure that a company has provided in Commission filings or otherwise made publicly available. The Division urges companies to take these sample comments into consideration as they prepare disclosure documents that may not typically be subject to review by the Division before their use, such as automatically effective registration statements and prospectus supplements for takedowns from existing shelf registration statements. The Division encourages companies to contact the industry office responsible for the company’s filings with any questions regarding the company’s proposed disclosure.
December 2022
Name
Address
Dear Issuer:
We have reviewed your filing and have the following comments. Please revise or update your disclosure in response to our comments.
General
Description of Business
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Risk Factors
We remind you that the company and its management are responsible for the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action or absence of
action by the staff.
Sincerely,
Division of Corporation Finance
[1] The statements in this guidance represent the views of the staff of the Division of Corporation Finance. This guidance is not a rule, regulation, or statement of the Securities and Exchange Commission (the “Commission”). The Commission has neither approved nor disapproved its content. This guidance, like all staff guidance, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.
[2] Securities Act Rule 408 and Exchange Act Rule 12b-20.
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