The SEC’s Division of Trading & Markets today issued a conditional no-action position that it would not object if compliant “user interfaces” designed to facilitate the execution of crypto securities transactions operate without registering as broker-dealers.  In plain English, the staff’s position applies to interfaces operating in a neutral fashion by providing mechanics to facilitate transactions on one or more trading platforms.  The staff defines “user interface” as “an interface provided by a website, browser extension, or other software application (e.g., mobile application) that may be embedded in a wallet or separately available for download, designed to assist users engaging in user-initiated crypto asset securities transactions on blockchain protocols (or blockchain-based smart contracts) utilizing the user’s self-custodial wallet.”

The staff’s statement includes several conditions, including that the user interface does not negotiate terms, take or route orders, execute transactions, solicit specific securities transactions or process trade documentation.  The conditions include compliance mechanisms, among other things, to evaluate and audit trading venues, and disclosures including those related to potential conflicts of interest.  The conditions do not expressly prohibit relationships with affiliated trading platforms.  The Division’s statement is available here:  SEC.gov | Staff Statement Regarding Broker-Dealer Registration of Certain User Interfaces Utilized to Prepare Transactions in Crypto Asset Securities

The Division described this relief as “interim” pending the adoption of formal rules related to crypto transactions.  As previously reported, it appears that the adoption of new legislation, along with SEC and CFTC rules, is on the horizon.  See The Clarity Act Advances Slowly, and The SEC and CFTC Anticipate Passage With A New Interpretation: Some Crypto Offerings Facilitated – Proskauer Rose LLP

Posted in Capital Markets, Private Funds
Tags: Blockchain, Cryptocurrency, Private Funds
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Photo of Frank Zarb Frank Zarb

Frank Zarb is a partner in our Corporate Department and a member of the Capital Markets Group, where he concentrates his practice on equity finance and a wide range of regulatory matters under U.S. federal securities laws.

He counsels public and private companies…

Frank Zarb is a partner in our Corporate Department and a member of the Capital Markets Group, where he concentrates his practice on equity finance and a wide range of regulatory matters under U.S. federal securities laws.

He counsels public and private companies, hedge funds and family offices, and market intermediaries and other financial institutions on a wide range of transactional and securities regulatory compliance matters including:

  • Equity investments and dispositions in public and private companies
  • Public company registration, disclosures and preparation of periodic reports
  • Tender offers, equity lines, proxy contests, SPACs, and other highly regulated transactions
  • Regulation M, Regulation SHO, Forms 13F and 13H, insider trading and other trading issues
  • Corporate governance and stock exchange listing standards
  • Federal and state proxy requirements as well as shareholder proposals and communications
  • Regulation of financial intermediaries, including trading of public and private equity, and complex and novel trading structures
  • Advocating with the SEC on behalf of a market intermediary related to back-office processing matters.

Frank’s practice is both domestic and international, beginning with his experience in senior positions with the Securities and Exchange Commission. As a member of the staff of the SEC’s Office of International Corporate Finance, Frank advised U.S. companies seeking to do business in the EU, Asia and the Middle East, as well as companies from those regions doing business in the U.S., or otherwise seeking to comply with the U.S. securities laws.  In the Office of Chief Counsel, he focused on federal proxy rules, and supervised a team of staff members that provided guidance in the course of proxy season.

Prior to joining the Firm, Frank was deputy general counsel/chief securities counsel for Bristol Myers Squibb Co. in a new position required by the SEC. Prior to joining Bristol-Myers, Frank was a corporate partner with Morgan, Lewis & Brockius.

Social Responsibility

Frank is a Trustee of the Gerald R. Ford Presidential Foundation, and he provides significant pro bono assistance to non-profit social service institutions in the Washington, D.C. area.

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Photo of Louis Rambo Louis Rambo

Louis Rambo is a partner in the Corporate Department and a member of the Capital Markets Group. He focuses his practice on counseling public companies and their boards of directors on corporate governance, capital markets transactions, mergers and acquisitions, securities regulation, disclosure and…

Louis Rambo is a partner in the Corporate Department and a member of the Capital Markets Group. He focuses his practice on counseling public companies and their boards of directors on corporate governance, capital markets transactions, mergers and acquisitions, securities regulation, disclosure and shareholder activism. Drawing on his previous tenure with the Securities and Exchange Commission in the Division of Corporation Finance, Louis partners with clients on capital raising, including underwritten equity transactions, at-the-market offerings and high-yield and investment grade debt offerings, as well as on structuring M&A transactions, spin-offs, tender offers and going private transactions. He advises public companies on developing governance and disclosure matters, including director independence, compensation, insider trading issues, shareholder proposals and stockholder meetings, and advises on shareholder activism and takeover defense.

Louis also regularly advises hedge funds, private equity funds, family offices, private companies and other financial institutions on a wide range of transactional and securities regulatory compliance matters, including capital raising, PIPEs and secondary transactions, novel and complex beneficial ownership issues arising under the federal securities laws, derivative transactions, insider trading issues and policies and compliance programs.

Louis previously served as an attorney with the SEC in the Division of Corporation Finance. While at the SEC, Louis worked on a number of transactional and securities compliance matters.

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