SEC releases new Rules for Online Lending on March 7, 2018.
This is apparently a major reason why the whole market tanked and everything seems to be struggling, pinned down to a reduced market cap.
They are saying that to get the protections offered by the federal securities laws and SEC oversight, investors should only trade assets classified as securities on a platform or entity registered with the SEC such as NSE (National Securities Exchange), ATS (alternative trading system), or broker-dealer.
Online trading platforms have been booming and being busted too, after they have become a popular way investors can buy and sell digital assets like cryptocurrencies or tokens sold in ICOs (Initial Coin Offerings).
The platforms usually claim to facilitate buying and selling digital assets quickly. Many of these platforms put up a common website where buyers and sellers gather and where investors access automated systems that display orders, do trades, and provide market data.
Many of these platforms facilitate the trade of assets that can be classified as a "security" under the federal securities laws. If a platform allows trading of digital assets classified as securities and operates like an "exchange," as defined by the federal securities laws, then they must register with the SEC as a national securities exchange or file for an exemption from registration. The federal regulatory framework overseeing registered NSEs and exempt markets is designed to protect investors and reduce fraudulent and manipulative trading practices.
Many online trading platforms appear to investors as SEC-registered and regulated marketplaces though they are not, the SEC staff warned. Many platforms call themselves "exchanges," which can give investors the impression that they meet the regulatory standards of an NSE.
Higher Standards?
Though some of these platforms say they have strict standards and choose only high-quality digital assets to trade, the SEC does not screen or review these standards and they are not included in the standards listing of national securities exchanges. Moreso, the SEC does not review the trading practices being implemented by these platforms. Therefore, there is no guarantee that access to a platform's trading services is the same for all users. That’s why investors should never assume that the trading practices meet the standards of an SEC-registered NSE. Also, many of these platforms offer order books with real-time bid and ask pricing and data on the system, giving the users the impression that they perform exchange-like functions. -But there is guarantee that such information has the same integrity as that provided by NSEs.
The SEC has provided some questions investors should ask before deciding to trade digital assets on an online trading site:
Do you trade securities on this platform? If so, is the platform registered as a national securities exchange (see our link to the list below)?
Does the platform operate as an ATS? If so, is the ATS registered as a broker-dealer and has it filed a Form ATS with the SEC (see our link to the list below)?
Is there information in FINRA's BrokerCheck ® about any individuals or firms operating the platform?
How does the platform select digital assets for trading?
Who can trade on the platform?
What are the trading protocols?
How are prices set on the platform?
Are platform users treated equally?
What are the platform's fees?
How does the platform safeguard users' trading and personally identifying information?
What are the platform's protections against cybersecurity threats, such as hacking or intrusions?
What other services does the platform provide? Is the platform registered with the SEC for these services?
Does the platform hold users' assets? If so, how are these assets safeguarded?
Source
To those who run exchange and lending platforms:
A platform that trades securities and operates as an "exchange," as defined by the federal securities laws, must register as a national securities exchange or operate under an exemption from registration, such as the exemption provided for ATSs under SEC Regulation ATS. An SEC-registered national securities exchange must, among other things, have rules designed to prevent fraudulent and manipulative acts and practices. Source
In addition, as an SRO (self-regulatory organization), an SEC-registered NSE must have rules and protocols guiding its members and persons associated with them. They must enforce compliance. They must also comply with the federal securities laws and must file its rules with the Commission.An ATS is also subject to regulatory requirements. This includes registering with the SEC as a broker-dealer and membership of an SRO. Please refer to the SEC publication for complete details.
Consultation with Securities Counsel and the SEC Staff
We encourage market participants who are employing new technologies to develop trading platforms to consult with legal counsel to aid in their analysis of federal securities law issues and to contact SEC staff, as needed, for assistance in analyzing the application of the federal securities laws.In particular, staff providing assistance on these matters can be reached at [email protected].
Conclusion
The SEC is apparently now at full speed advancing in their mission to protect investors. Their staff will continue to focus on platforms that facilitate trading of digital assets and impose federal securities laws. This is expected to alleviate concerns regarding fraudulent exchanges and lending scams that negatively affect the whole industry. For the meantime, it has reduced the market cap and we can see everything in red now. Hopefully, this effect is temporary as the industry scrambles to comply with SEC regulation and resume normal operations.
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A very useful report for its users. Very useful information.
Thanks!
Great article sir... information is interesting...👍
Thank you.
The course could have been affected by news about the hacking of the Binance.I think this hype will calm down and bitcoin will fly again!;)
I believe so. Cryptos are here to stay, so there's always a time for recovery after these market movements.
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