SEC credits self-reporting and cooperation in not imposing penalty on ICO sponsor

Abstract

Purpose

To explain a February 20, 2019 US Securities and Exchange Commission (SEC) settled enforcement action against Gladius Network LLC for failing to register an initial coin offering (ICO) under the federal securities laws, in which Gladius was able to avoid a civil penalty by self-reporting the violation and cooperating with the SEC enforcement staff.

Design/methodology/approach

Explains Gladius’ self-reporting, cooperation and remedial steps; why the SEC imposed no civil penalty on Gladius; and two similar cases the SEC instituted in July 2018 against companies that conducted unregistered ICOs, did not self-report, and were penalized. Provides analysis and conclusions.

Findings

The Gladius case offers important insight into how the SEC and its staff think about cooperation credit in resolving SEC enforcement actions and sends a clear message that self-reporting to the SEC can result in meaningful cooperation credit. In three recent cases, the Commission has made clear that once it put the industry on notice that ICOs could be securities that must be registered under the federal securities laws, a party risks enforcement action by failing to do so.

Originality/value

Expert analysis and guidance from an experienced securities lawyer who counsels clients on all manner of SEC enforcement, examination and regulatory policy matters.

Citation

Hawke, D. (2019), "SEC credits self-reporting and cooperation in not imposing penalty on ICO sponsor", Journal of Investment Compliance, Vol. 20 No. 2, pp. 13-15. https://doi.org/10.1108/JOIC-04-2019-0025