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The Corp Fin Staff posted a new sample comment letter addressing recent developments in the crypto markets. As is typical in these sample letters, the Staff describes why it is providing the guidance in the form of the sample letter, and then includes a series of sample comments, presumably drawn from experience with actual filing reviews. The sample comment letter notes:

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 sample comments focus on a company’s business description, MD&A and risk factors and address a number of topics, including:

– The exposure companies have to crypto markets;
– The impact of recent bankruptcies in the crypto space;
– The steps companies have taken to safeguard crypto assets;
– The use of crypto assets as collateral;
– Recent experience with redemptions and withdrawals; and
– Material risks, including risks arising from excessive redemptions and withdrawals (or suspension of such activity), reputational risks, jurisdictional issues, regulatory developments, safeguarding of assets concerns, risk management issues, access to capital and liquidity issues, and market disruption risks.

– Dave Lynn