What has happened?
The U.S. Securities and Exchange Commission (SEC) has issued another investor alert, this time warning investors of misrepresentations about SEC approvals of offerings.
What does this mean?
Companies that offer securities for sale, including through initial coin offerings, can be subject to filing requirements with the SEC, but the regulator warned that a filing does not mean that it has "in any way validated or approved of the offering".
"Indeed, the SEC never 'approves' an offering", the regulator said in its alert.
The watchdog said that staff had noticed recently that some ICO sponsors have been allegedly touting SEC forms and filings as proof that the investment had received SEC approval.
However, this is not true, and although a firm may make a filing on the SEC's EDGAR database, this does not confer any special status.
"While the SEC staff reviews certain forms and filings for compliance with disclosure obligations, the SEC does not evaluate the merits of any offering nor does it determine if any securities offered are “good” investments, " the SEC said.
The SEC then proceeded to explain what a filing means and what actions its staff take with respect of such filings.
For example, a Form D, which firms use when relying on an exemption from registration, merely represents a notice to the SEC and the public of the offering, including details about the company and the offering.
As such, Form D does not represent registration of the offering with, or approval by the SEC and its staff does not take any action on such filings.
Further, under a Regulation A exemption, a company must file an offering statement on Form 1-A on EDGAR.
The SEC staff may review Forms 1-A for compliance with disclosure obligations and only when the staff has qualified the offering statement may the company accept payment for the securities offered.
"However, the filing itself does not mean the offering has been qualified by, or registered with, the SEC. Qualification does NOT mean the SEC has approved the offering, " the SEC said.
Early-stage ventures may also use Regulation Crowdfunding to offer and sell securities through an online platform that is a funding portal or broker-dealer.
Under the exemption, a company must file an offering statement on Form C on EDGAR, but SEC staff does not take any action on Form C filings, and a Form C does not mean that the scheme has been approval by the SEC.
This is the seconf alert the SEC has released in two weeks.
Last week, it joined forces with the Commodity Futures Trading Commission to issue a joint alert, warning investors about scams involving websites touting too good to be true cryptocurrency investment opportunities.
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