The U.S. Securities and Exchange Commission (SEC) is proposing changes to the rules under Regulation ATS to address the market structure issues that have led to trading disruptions in the securities markets and to extend the time period to 15 minutes during which ATSs must match orders. This would provide more time for the matching of orders and better allow ATSs to match and clear incoming orders. Additionally, the SEC is proposing to expand the current scope of Regulation ATS to cover all securities, not just equity securities.

The U.S. Securities and Exchange Commission (SEC) recently completed its inaugural round of enforcement actions for the year with its latest settlements with the auditors of four different companies. The SEC was also active in warning private companies about potential violations and announcing the appointments of several new SEC members, including its new Chairman Jay Clayton. The SEC also delayed the release of several key decisions that would affect the cryptocurrency and securities markets.

Securities Regulators Remain Busy with Warnings Issued, Enforcement Actions Taken, and Decisions Delayed

Securities regulators and law enforcement agencies cannot afford downtime.  With digital asset markets operating at all hours of the day and on a global scale, there is a constant influx of bad actors that needs to be contained.  Last week was no exception, with several events related to the launch of cryptocurrencies and the pursuit of thieves.

Securities and Exchange Commission defers to VanEck ETF

While not all hope is lost, there was a small, unsurprising setback this week: The SEC has decided to exercise its right to defer a decision on VanEck’s bitcoin ETF proposal.

Maybe 2021 won’t be so different after all.  The SEC has reportedly received ten new proposals to launch bitcoin ETFs in recent months.  With the proliferation of digital assets over the past 6 months, many have speculated that the SEC may be ready to change its stance and finally approve such a fund.

The SEC now has until June 17 to make a decision or further delay the process.  In total, the SEC may extend the decision-making procedure by up to 240 days if it deems it necessary.  If that happens, we’ll have to wait until late 2021 to find out the fate of bitcoin ETFs for that year.

Replace SIM card

While not necessarily securities, several people are now being held accountable for their poor decisions that led to an attempted theft of over half a million dollars.  The United States Department of Justice (USDOJ) has announced that Eric Meiggs of Brockton, Massachusetts, along with several accomplices, has pleaded guilty to the following charges in connection with this event.

  • Electronic fraud
  • Computer fraud and abuse
  • Aggravated Identity Theft
  • Conspiracy

SIM swapping is one of the most common methods used by thieves to gain access to cryptocurrencies of unsuspecting victims. The US Department of Justice says,

SIM spoofing attacks convince the victim’s mobile provider to redirect the phone number from the SIM card (subscriber identity module) in the victim’s mobile phone to the SIM card on the side of the mobile phone controlled by the cybercriminals.

The cybercriminals then impersonate the victim by contacting the online service provider and asking them to send a password reset link or authentication code to the fake SIM device now under their control.  Cybercriminals can then reset the victim’s account information and use it to gain unauthorized access to the victim’s account or compromise the account.

Suspicious activity

Tokenized shares are quickly becoming a popular way to access publicly traded companies through digital asset exchanges.  Currently, two popular exchanges compete with this particular service: Bittrex Global and Binance.

Regulators around the world show that they are not always happy with these new services.  Notably, BaFin, the German financial regulator, said Binance’s decision to back tokenized shares violated existing securities laws, which require a prospectus to be submitted for approval before the shares are floated – a requirement that was not met.  In a statement, BaFin called Binance’s actions suspicious.

Binance’s decision, which is also under investigation by Hong Kong securities regulators, could result in heavy fines running into the millions of dollars if a resolution with BaFin cannot be found.

sigh of relief

While the day of reckoning has arrived for the aforementioned SIM card exchanges and soon perhaps Binance as well, several companies have a reason to celebrate today.  About a year ago, 11 companies were indicted for various securities law violations.  This week, five of the 11 named companies dismissed the complaints for lack of evidence provided by the complainants.  These include 5,

  • Civil technologies
  • HDR Global Trading
  • Kaydex
  • A situation study
  • Kwantum Stamp

The result of these lawsuits is part of a growing trend of plaintiffs being unable to make their case.  To date, several companies, including Riot Blockchain and Bancor, have seen similar allegations related to securities law violations go nowhere, which sets the bar high for those seeking to make claims.

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