By CCN.com: Crypto winter or not, the U.S. Securities and Exchange Commission (SEC) is cracking down on products that could mislead investors eager to gain exposure to bitcoin – or at least the technology behind it.
The regulator has begun pressuring fund providers that offer so-called “blockchain ETFs” to remove the word “blockchain” from the fund names. Bloomberg reports that the SEC already asked at least two companies, Reality Shares and Amplify, to scrub the word “blockchain” from their blockchain-focused ETFs.
Asset manager Reality Shares launched its fund last year. The ETF gives investors exposure to the blockchain market in China, which the firm’s CEO Eric Ervin described as “quickly becoming a global epicenter for blockchain innovation.” Still, citing anonymous sources with knowledge on the case, the regulator reportedly encouraged both companies to make amends to their filings back in 2018. However, even though the companies heeded the regulator’s “encouragements” and implemented the name change, Bloomberg notes that the companies’ funds contained tickers that still, one way or the other, referred to the nascent technology.
Reality Shares’ fund trades under the ticker BLCN. Meanwhile, its fund is described as a “Nasdaq NexGen Economy ETF.” Amplify’s fund trades under the symbol BLOK, while the product is described as “a transformational data-sharing ETF.”
Back in 2011, the SEC implemented Rule 35d (also known as the “Names Rule”) in a bid to provide additional clarity to the guidelines of the Investment Company Act. According to this amendment, funds are to ensure that there is at least an 80% correlation between assets and their descriptions.
Last year, SEC Chairman Jay Clayton warned that the agency would crack down on companies that changed their names in a bid to take advantage of blockchain technology at the height of the crypto boom, stating:
“The SEC is looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering.”