Petitioner Calls on SEC to Allow ICO Remediation

Petitioner Calls on SEC to Allow ICO Remediation

A petition has been filed with the Securities and Exchange Commission (SEC) to allow older ICOs seek remediation if they feel there was some possible violation. We've previously writted about how regulation affects the crypto markets here. According to the media sources, the appeal was submitted by the fintech firm Liquid M Capital, which was acquired by Templum earlier in February.

Submitted with the agency on January 26th, the petition requests that the SEC should "provide an opportunity for issuers of tokens through initial coin offerings that took place prior to the promulgation of related guidance by the SEC the opportunity to remediate their illegal offerings." In other words, the petitioner is asking SEC to show some flexibility towards the early market players who went for the practice when there was no guidance.

The letter, which is available on SEC’s website, argues: "Chairman Clayton recently stated that he has 'yet to see an ICO that doesn't have a sufficient number of hallmarks of a security.”

There are a number of firms (token issuers) who have issued tokens in the past but did not follow the regulatory guideline of registering their offer – because there was no exact regulatory advice at that time. Now, the regulator should grant them some space to remediate their past offerings and do it in line with the latest guidelines.

The firm, Liquid M has a long history of reaching SEC for a number of clarifications and regulations surrounding cryptocurrencies. Earlier in 2017, the firm reached out SEC to define new rules for token sale, and create a “regulatory sandbox” that enable fintech startups to test innovative products in line with regulations.
The firm re-approached the SEC in August when the agency released its finding of the DAO collapse. While the agency declared token sales subject to federal securities laws, Liquid M’s CEO urged the agency to create detailed drafts that included specifics.

What If the SEC Accepts the Petition?

If we look at the text and background of the petition, it addresses a very serious problem. While SEC has issued some brief guidance for the token sale, there is still confusion in the industry about the coin offerings that were done prior to that. What is the legal status of those ICOs? If the Securities and Exchange Commission gives some specific guidance on this, it could fix the problem once and for all.

Early in December 2017, the SEC chairman had stated that – “A number of concerns have been raised regarding the cryptocurrency and ICO markets, including that, as they are currently operating, there is substantially less investor protection than in our traditional securities markets.”

However, when asked about the fresh regulations for ICOs, he stressed upon following of the federal securities laws and promised strict action in case there is a violation of these very laws. Now, it would be interesting to see how the SEC addresses the fresh question raised about the past ICOs – it will be ‘make or break’ situation for many startups!

At InWage, we have been advising businesses in conducting ICOs in line with the updated advice and guidelines by the SEC. If you aspire to be the next big hit in the crypto-market, get in touch and we’ll guide your way!