Speaking in San Diego, Clayton warned that some attorneys advising companies on ICOs are breaching their professional duties, and even implied that they might be the target of disciplinary actions themselves.
"Legal advice (or in the cases I will cite, the lack thereof) surrounding ICOs helps illustrate this point. … First, and most disturbing to me, there are ICOs where the lawyers involved appear to be, on the one hand, assisting promoters in structuring offerings of products that have many of the key features of a securities offering, but call it an “ICO,” which sounds pretty close to an “IPO.” On the other hand, those lawyers claim the products are not securities, and the promoters proceed without compliance with the securities laws…
Second are ICOs where the lawyers appear to have taken a step back from the key issues – including whether the “coin” is a security and whether the offering qualifies for an exemption from registration – even in circumstances where registration would likely be warranted. These lawyers appear to provide the “it depends” equivocal advice, rather than counseling their clients that the product they are promoting likely is a security. Their clients then proceed with the ICO without complying with the securities laws because those clients are willing to take the risk.
With respect to these two scenarios, I have instructed the SEC staff to be on high alert for approaches to ICOs that may be contrary to the spirit of our securities laws and the professional obligations of the U.S. securities bar."
Is this the final warning before massive regulation and penalties?
His comments set off a storm on twitter about which lawyers, in particular, the SEC might be in conjunction with the CFTC investigating. Clayton did not name anyone in particular, but hinted his targets might include those who have created the aggressive legal framework—and created things such as the SAFT. Some people are speculating that his intentions, are to scare some attorneys that they might be facing disciplinary action from the SEC if this continues.
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