Securities and Exchange Commission (SEC) Chairman Jay Clayton, speaking at the Securities Regulation Institute in San Diego on January 22, 2018, remarked that the regulatory body is “looking closely” at companies that have revamped either their business model or name to profit from the hype surrounding the crypto space.
SEC Watching Overnight Blockchain Companies
There’s been a slate of traditional companies ditching their old business models in favor of the ongoing blockchain boom. To this end, the aforementioned Clayton said his agents are watching:
“The SEC is looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering.”
One such company this declaration could possibly affect is the Long Island Iced Tea Corporation, which changed its name to “Long Island Blockchain Corporation” and boosted the company stock price in the process. Another notable company, Kodak, saw its stock price jump after publicizing a plan to have a cryptocurrency developed for photographers.
According to Clayton, the concern is that these companies are only using these blockchain rebrands to capitalize on the ongoing cryptocurrency mania:
“I doubt anyone in this audience thinks it would be acceptable for a public company with no meaningful track record in pursuing the commercialization of distributed ledger or blockchain technology to (1) start to dabble in blockchain activities, (2) change its name to something like ‘Blockchain-R-Us,’ and (3) immediately offer securities, without providing adequate disclosure to Main Street investors about those changes and the risks involved.”
SEC Cracks Down on ICO Fraudsters
Clayton also pointed toward the developing Initial Coin Offering (ICO) trend that has become a substitute way for companies to raise funds. Many companies have netted millions of dollars offering ICOs to its client even without a legitimate plan or roadmap, which is problematic for Clayton.
“I have instructed the SEC staff to be on high alert for approaches to ICOs that may be contrary to the spirit of our securities laws and the professional obligations of the U.S. securities bar,” the Chairman noted.
In the past, the SEC has suggested that any such cryptocurrency-based fundraising should adhere to U.S. law. In addition, the regulatory body has cautioned investors of the risks involved in investing in ICOs. Overall, the atmosphere is one of stern lenience at present.
Will SEC take action or only “look closely” at businesses linking themselves with blockchain? Let us know your thoughts in the comments section below.
Images via KPCC, SEC