securities

The U.S. Securities and Exchange Commission (SEC) today charged Coinbase, Inc., the largest crypto asset trading platform in the U.S., with operating a crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency as well was failing to register the offer and sale of its crypto asset staking-as-a-service program (the Complaint). Regulators across the world are increasing their oversight of new and emerging securities and crypto carbon offerings should heed the recent actions of the SEC and carefully examine whether their offerings constitute unregulated securities. This bulletin briefly summarizes key details of the Complaint. The SEC’s Complaint alleges that Coinbase intertwines the traditional services of an exchange, broker, and clearing agency without having registered any of those functions with the SEC as required by law. The Complaint alleges that since 2019, Coinbase has: provided a marketplace and brought together the orders for securities of multiple buyers and sellers using established, non-discretionary methods under which such orders interact; engaged in the business of effecting securities transactions for the accounts of Coinbase customers; provided facilities for comparison of data respecting the terms of settlement of crypto asset securities transactions, served as an intermediary in settling transactions in crypto asset securities by Coinbase customers, and acted as a securities depository; and engaged in an unregistered securities offering through its staking-as-a-service program, allowing customers to earn profits from the “proof of stake” mechanisms of certain blockchains and Coinbase’s efforts. The SEC stated that Coinbase’s actions “deprive[d] investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC” and that its failure to register its staking-as-service program “depriv[ed] investors of critical disclosure and other protections.” The Complaint follows yesterday’s similar charges, including several alleged securities law violations, against…

The board of the (IOSCO) today published a series of recommendations applicable to the market for ESG ratings and data products (Ratings). IOSCO notes that the market does not typically fall within the remit of securities regulators and suggests that regulators could consider focusing greater attention on the use of Ratings and the activities of Ratings providers in their jurisdictions. IOSCO’s recommendations are as follows (emphasis added): Regulators could consider focusing more attention on the use of Ratings and Ratings providers that may be subject to their jurisdiction. Ratings providers could consider adopting and implementing written procedures designed to help ensure the issuance of high quality Ratings based on publicly disclosed data sources where possible and other information sources where necessary, using transparent and defined methodologies. Ratings providers could consider adopting and implementing written policies and procedures designed to help ensure their decisions are independent, free from political or economic interference, and appropriately address potential conflicts of interest that may arise from, among other things, the Ratings providers’ organizational structure, business or financial activities, or the financial interests of the Ratings providers and their officers and employees. Ratings providers could consider identifying, avoiding or appropriately managing, mitigating and disclosing potential conflicts of interest that may compromise the independence and objectivity of the Ratings provider’s operations. Ratings providers could consider making adequate levels of public disclosure and transparency a priority for their Ratings, including their methodologies and processes to enable the users of the product to understand what the product is and how it is produced, including any potential conflicts of interest and while maintaining a balance with respect to proprietary or confidential information, data and methodologies. Ratings providers could consider adopting and implementing written policies and procedures designed to address and protect all non-public information received from or communicated to them…

SEC Charges Coinbase For Operating as an Unregistered Securities Exchange

IOSCO Calls for Oversight of ESG Ratings