Existing Tools Foster Fintech, SEC Attorney Says (Corrected)

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By Michael J. Bologna

Existing SEC tools such as no-action letters and exemptive relief provide space for companies to experiment with new financial technologies, a senior commission official said Oct. 10.

These tools can be utilized “to provide new firms and companies with regulatory relief where appropriate,” Ryan VanGrack, head of the Securities and Exchange Commission Fintech Working Group, said during the FinTank Blockchain Summit in Chicago.

VanGrack’s remarks came in response to an audience question about whether U.S. rulemakers might create sandboxes that provide additional relief from regulations.

VanGrack said he rejected the premise that innovation is impossible “in the absence of regulatory sandboxes,” but didn’t comment on what, if any, actions the SEC might take in the future.According to VanGrack, blockchain and distributed ledger technologies hold great promise for improving capital markets and providing financial services to the public.

The SEC is more interested in regulating conduct than technology, VanGrack said. In his view, the current principles-based framework can easily adapt to new technologies for creating and distributing securities.

He said his comments were his own and didn’t necessarily reflect the views of the commission or its staff.

Reaching Out

VanGrack encouraged fintech innovators to reach out to the SEC as regulatory questions arise. He said the agency is anxious to provide assistance on the application of the federal securities laws to innovators’ particular business strategies.

VanGrack said the SEC recently established “a more efficient and productive” communications channel for such discussions through the email portal FinTech@sec.gov. Requests for regulatory exemptions and no-action letters will be dealt with on a facts-and-circumstances basis, he said.

“We are not necessarily in the business of providing legal advice and guidance,” VanGrack said. “That’s what your securities counsel is for.” However, he said, a party that decides after speaking with the experts to request a no-action letter or other relief can be put in touch with the people in charge of that process, making for a more “efficient and productive” conversation.

Representatives of blockchain organizations peppered VanGrack with questions about regulatory relief in the context of the booming market for initial coin offerings (ICOs). VanGrack said he wasn’t aware of any company involved in an ICO receiving a no-action letter from the commission.

Startup companies have used ICOs to raise more than $2 billion in 2017 by offering investors digital tokens in return for their participation. SEC Chairman Jay Clayton recently warned investors about potential “pump-and-dump schemes” flowing through the ICO space.

Corrects official’s title in second paragraph and clarifies that he was speaking only about current policy rather than potential future actions.

To contact the reporter on this story: Michael J. Bologna in Chicago at mbologna@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com

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