In his recent remarks at the Securities Regulation Institute, SEC Chairman Jay Clayton had some stern words for market professionals, especially lawyers, involved in initial coin offerings (ICOs). He expressed concern that lawyers in the space “can do better” in their role as gatekeepers to the securities markets, particularly in advising clients whether the “coin” being offered is a security requiring registration.In particular, he noted situations where lawyers may have helped to structure an ICO with many of the hallmarks of a securities offering, but have taken the position that the coin is not a security. Second, he noted situations where attorneys have apparently stepped back and provided “equivocal advice” rather than counseling clients that the ICO being promoted would likely require registration. In his view, these approaches are inappropriate in light of SEC guidance indicating that ICOs are likely to qualify as securities under the long-standing Howey test for investment contracts.
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