US securities regulator issues new guidelines for firms, makes cryptocurrency risk disclosure must

The US securities regulator has asked the trading companies to disclose to the investors any potential impacts from turmoil in cryptocurrency trading. In its new guideline released on Thursday, the Securities and Exchange Commission (SEC) has told the companies selling securities that they may have to share with their investors whether the firms have any financially material exposures to counterparties that have filed for bankruptcy.

“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 SEC said in a sample letter, reports Reuters news agency.

The guidelines further state that the public firms should also inform their investors of any risks arising out of disruptions in crypto asset markets, depreciated stock prices, loss of customer demand and risk of legal proceedings.

The SEC’s corporate finance division urged the companies to adopt these recommendations as they prepare documents “that may not typically be subject to review by the division before their use.”

The latest missive by the SEC comes in the wake of the FTX saga, where the crypto firm filed for bankruptcy after loaning customer funds to a risky trading company that was founded by FTX’s former CEO Sam Bankman-Fried.

It is estimated that more than 100,000 customers were affected by the exchange’s failure.

On Wednesday, SEC chief Gary Gensler brushed aside criticisms that the agency failed to act against the crypto firms misusing customer funds.

Gensler said that the SEC would clamp down on the firms if they fail to comply with existing rules.

(With inputs from agencies)