As part of its effort to provide greater clarity on the application of federal securities laws to crypto assets, on 1 July 2025, the SEC's Division of Corporation Finance (Division) released a statement (Statement) addressing its views about the application of certain disclosure requirements to crypto asset exchange-traded products (ETPs).
The Statement, which doesn't apply to investment companies registered under the Investment Company Act of 1940, provides examples of specific disclosure practices of ETPs with respect to Regulations S-K and S-X disclosure requirements. While the Statement doesn't make many specific recommendations, it includes the following observations regarding effective disclosure:
- In summary prospectuses, ETPs identified aspects of the offering that are the most significant and highlighted them in clear, plain language, avoiding repetition of the prospectus text. Disclosure included information about the ETPs' investment objectives and tracking index or benchmark, policies regarding the management of the underlying crypto assets, and incidental rights associated with underlying crypto assets, including forks or airdrops;
- ETPs have disclosed information, including risk-related information, about the underlying crypto assets, associated networks, and net asset value calculation;
- Concerning service providers, ETPs identified authorized participants (APs), described material terms of AP agreements, disclosed, with respect to custodial arrangements, storage policies for and access to private keys, whether the ETPs' crypto assets are commingled or held in wallets with assets of other customers, and how transfers of crypto assets from cold, warm or hot storage occur;
- With respect to distribution, ETPs described the creation and redemption process, how creation and redemption orders are settled onchain or offchain, and the potential impact on the arbitrage mechanism from price volatility; and
- ETPs have disclosed whether sponsors hold the underlying crypto assets or have related exposure creating conflicts of interest, and whether the ETPs have codes of conduct or other requirements for transactions in the underlying crypto assets.
The Statement also includes information about ETPs' disclosure practices with respect to management and financial statements.
The Division cautioned that ETPs should avoid overly technical terminology or jargon, and provided guidance regarding specific tags in the filing fee table.
Summer Associate, Lauren M. Pezzi, contributed to this blog.
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