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SEC rejects two Blockchain ETF Funds in US

Maya Mandzikasvili | Apr. 15, 2019
SEC rejects two Blockchain ETF Funds in US

April 15, 2019, | AtoZ Markets - Bloomberg reports that the US SEC has required two Blockchain ETF Funds to eliminate the word “blockchain” from their monikers.

The US commission encouraged Amplify and Reality Shares to change their ETF funds names at the last minute back in 2018. Both aforementioned US Blockchain ETF Funds mentioned “blockchain” in their early filings.

Bloomberg said that there were other funds associated with the blockchain, which eventually changed their names at the request of the US authority.

US Blockchain ETF Funds in a brief

Despite the exclusion of the word “blockchain”, the tickers of funds refer to the technologies that it uses.

Amplify ETFs is a subsidiary of the Amplify Investments, which provides investment advisory services. The company launched blockchain-based ETF entitled as BLOK back in January 2018. The new US Blockchain ETF Fund described as "ETF with transformational data exchange," supposed to sponsor publicly-traded global companies leading the research, investment and revenue creation related to blockchain-based and other distributed ledger technologies.

Reality Shares was founded in 2012 and offers a portfolio of exchange-traded funds with a range of investment objectives, such as diversification, lower correlation, risk mitigation or unique market exposures.

Back in 2018 when Reality Shares Nasdaq NexGen Economy ETF (BLCN) was launched, the company officials stated that it will offer investors quick-and-dirty exposure to companies that will benefit from the rise of cryptocurrencies and blockchain.

Blockchain and ETF under the US SEC radar

The US companies which change their name by adding the word “blockchain” attract the US SEC. The same could be applied to the crypto assets. SEC Chairman Jay Clayton in one of his latest interviews outlined that the cryptocurrency will remain in the center of the regulator’s attention in the near future. Jay Clayton noted that the industry has the ability to comply with federal securities laws.

Earlier in April, the SEC issued new guidelines on cryptocurrency regulation to determine whether digital assets are investment contracts.

Back in 2001, the SEC adopted the Rule on Names (Rule 35d) to clarify the guidelines of the Investment Company Act of 1940 which obliges issuers not to use “materially deceptive or misleading” names.

Thus, funds, including US Blockchain ETF funds, are required to ensure that at least 80 percent of assets match the description in their names.

As Bloomberg reports, the SEC is highly concerned due to the growing number of ETFs. According to the media, the number of assets in these funds has grown since 2014, and more than 10% of new ETFs in 2018 focused on a specific topic.

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