SEC Cracks Down on Misleading Crypto and Data Sharing ETF Monikers


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Due to the saturation of the ETF market and misleading filing monikers, the SEC has asked several firms to change their filing names, Bloomberg reports on April 12, 2019.

Crack Down

It is no secret that a good number of the Securities and Exchange Commission’s ‘(SEC) interaction with the crypto community have been through the back-and-forth process to get a crypto Exchange Traded Fund (ETF) approved with many trying and failing.

Now, some of the previous interactions between the SEC and companies filing ETFs have been revealed. Strangely, the greatest controversy turns around the names attached to the ETFs themselves.

A Bloomberg report from April 12, 2019, reveals that the SEC has asked two firms to remove the word “blockchain” from the tickers of their ETF filings, along with many other non-blockchain related filings.

Change of Name

In 2018, the SEC required that a third of the ETF filings change their names to fit the standards of the Commission.

Among these were Amplify, who now trades funds as  BLOK, with the product being described as a “transformational data sharing ETF” and Reality Shares which use the title BLCN and describe their product as a “Nasdaq NexGen economy ETF.”

The reason for these actions is that the Commission is combating the rapid proliferation of funds offering investments in all sorts of products such as electric cars, videos games, and blockchain technologies. Between 2014 and 2018, the assets in these funds tripled making the Commission very cautious.

Also, the ETF market itself has become much more saturated and businesses are looking for ways to stand out from the crowd. There is also the Investment Company Act of 1940 which prohibits companies from adopting “materially deceptive or misleading” names. The SEC also has Rule 35d-1 in 2001 which states that 80 percent of the products being offered by the fund must correlate with what their monikers suggest.

This new development has also put companies on their toes, making them more cautious about what they call themselves.

“We get questions more than we used to where we have to be able to defend our name,” said J. Garrett Stevens, chief executive officer of Exchange Traded Concepts.

“Now almost all names, they’ll come back and say ‘Can you justify, give us your explanation on why this name is OK?’”

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