SEC’s Investor Advisory Committee to Discuss Blockchain Technology

Photo Credit: Securities and Exchange Commission / Flickr

The U.S. Securities and Exchange Commission (SEC) is holding a public meeting of its Investor Advisory Committee next month to discuss Blockchain and distributed ledgers and their impact on the securities markets.

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The meeting will be held on October 12 at the SEC headquarters in Washington, DC. The event will be live streamed on the SEC website, The public can submit written statements to the committee, according to the commission’s statement.

The commission’s Investor Advisory Committee is established pursuant to Section 911 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Other agenda items include remarks from Commissioners; an overview of law school clinic advocacy efforts on behalf of retail investors; a discussion regarding electronic delivery of information to retail investors; subcommittee reports; and a nonpublic administrative work session during lunch.

SEC Doesn’t Want Cryptocurrency and ICO Markets to Grow Unregulated

At the end of the last month, the SEC announced that some of initial coin offerings (ICOs) are subject to the requirements of the federal securities laws.

ICOs or “Token Sales” are conducted by virtual organizations using distributed ledger or Blockchain technology.

According to the SEC’s Report of Investigation, tokens offered and sold by a “virtual” organization known as “The DAO” were securities and therefore subject to the federal securities laws.

The report suggests that issuers of distributed ledger or Blockchain technology-based securities must register offers and sales of such securities unless a valid exemption applies. The people participating in unregistered offerings may also be liable for violations of the securities laws.

In addition, securities exchanges engaged in trading must register unless they are exempt. The purpose of the registration provisions of the federal securities laws is to ensure that investors are sold investments that include all the proper disclosures and are subject to regulatory scrutiny for investors’ protection, the commission said in the report.

“The SEC is studying the effects of distributed ledger and other innovative technologies and encourages market participants to engage with us,” SEC Chairman Jay Clayton said in a statement. “We seek to foster innovative and beneficial ways to raise capital, while ensuring – first and foremost – that investors and our markets are protected.”

The SEC issued the investigation report following an inquiry by the agency’s Enforcement Division into whether The DAO and associated entities and individuals violated federal securities laws with unregistered offers and sales of DAO Tokens in exchange for “Ether,” a virtual currency. The investigators found that the DAO has been described as a “crowdfunding contract” but it would not have met the requirements of the Regulation Crowdfunding exemption.

So, the SEC cautioned the industry and market participants that the federal securities laws apply to those who offer and sell securities in the United States, regardless whether the issuing entity is a traditional company or a decentralized autonomous organization, regardless whether those securities are purchased using U.S. dollars or virtual currencies, and regardless whether they are distributed in certificated form or through distributed ledger technology.

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