SEC

SEC Adopts Final Rules for Disclosure of Hedging Policies

 

On December 18, “[t]he Securities and Exchange Commission (“SEC”) [] approved final rules to require companies to disclose in proxy or information statements for the election of directors any practices or policies regarding the ability of employees or directors to engage in certain hedging transactions with respect to company equity securities.” Release.

SEC Adopts Rule of Practice 194

 

On December 19, the Securities and Exchange Commission (“SEC”) published its adoption of Rule of Practice 194, which, generally speaking, “creates a transparent, efficient, and comprehensive process for a registered security-based swap dealer or major security-based swap participant, collectively known as SBS Entities, to apply to the Commission for relief from the statutory disqualification prohibition found in Exchange Act Section 15F(b)(6).” Release.

SEC Adopts Rules That Increase the Information Brokers Must Provide to Investors on Order Handling

 

On November 2, the Securities Exchange Commission (“SEC“) announced that it voted to adopt amendments that require broker-dealers to disclose the way that they handle investors’ orders. The new disclosures will provide customers with information about the average rebates the broker received from, and the fees the broker paid to, treading venues. Release.

Settlements of SEC Registration Charges with Two ICO Issuers Serve as Warning and Compliance Models

 

On November 16, the Securities Exchange Commission (“SEC“) announced settled charges against two companies that sold digital tokens in initial coin offerings (“ICOs“). According to the Press Release announcing these settlements, these are the Commission’s first cases imposing civil penalties solely for ICO securities offering registration violations. The remedies agreed to include the return of funds to harmed investors, the registration of the tokens as securities under the Securities Exchange Act of 1934, the filing of periodic reports with the Commission, and the payment of $ 250,000 as a monetary penalty. READ MORE

SEC Charges EtherDelta Founder with Operating an Unregistered Securities Exchange

 

On November 8, the Securities and Exchange Commission (“SEC“) announced that it has settled charges against Zachary Coburn, the founder of EtherDelta, a digital token trading platform. Significantly, this is the SEC’s first enforcement action based on findings that such a platform operated as an unregistered national securities exchange. The SEC has previously brought enforcement actions relating to unregistered broker-dealers and unregistered Initial Coin Offerings (“ICOs“), including some of the tokens traded on EtherDelta.

According to the SEC’s order, EtherDelta is an online platform for secondary market trading of ERC20 tokens, a type of blockchain-based token commonly issued in ICOs. The order found that Coburn caused EtherDelta to operate as an unregistered national securities exchange.

As stated in the Press Release and Order, EtherDelta provided a marketplace for bringing together buyers and sellers for digital asset securities through the combined use of an order book, a website that displayed orders, and a “smart contract” run on the Ethereum blockchain. Most notably, over an 18-month period, EtherDelta’s users executed more than 3.6 million orders for ERC20 tokens, including tokens that are securities under the federal securities law. Notably, the SEC did not identify the specific tokens it found to be securities or the salient characteristics thereof.

Therefore, EtherDelta acted as an online national securities exchange and was required to register with the SEC or qualify for an exemption.

The SEC’s investigation is ongoing.