Tuesday, November 19, 2019
Reality Shares ETF Trusts To Withdraw Its Proposal exchange-traded-fund (ETF) After SEC Staff Request

According to a letter published by the United States (U.S.) Securities and Exchange Commission (SEC), Reality Shares ETF Trusts is withdrawing the proposal of an exchange-traded fund submitted to the SEC on Tuesday 12th Feb at the request of SEC agency staffers. Reality Shares ETF Trusts is a division of Blockforce Capital. It filed a proposal for an ETF aiming to invest in a portfolio that included both sovereign debt instruments and Bitcoin (BTC) futures.

The proposal states that ETF was designed to “provide investment exposure to global currencies, both fiat, and virtual currencies, that have been widely adopted for use (e.g., as store-of-value, international remittance, foreign-exchange trading) throughout the world.” On the other hand, SEC specified in the document that the withdrawal was “at the request of the Staff of the U.S. Securities and Exchange Commission. No securities have been sold in connection with the offering of the Fund.”

The lawyer at Reality Shares confirmed the news stating that:
“I can confirm that we did withdraw it and it was withdrawn because the staff is still taking the position that it’s not appropriate to file a registered 40 Act fund with cryptocurrency exposure at this time.”
He also added that the proposal was filed under the Investment Company Act of 1940 thus it would have resulted in getting automatically approved within 75 days, which was why SEC staffers took issue.

According to an attorney familiar with U.S. securities regulations, the SEC Director of Investment Management, Dalia Blass outlaw fund sponsors to register crypto-related investment products under the 40 Act in a letter dated January 2018. Also, in addition to it letter also stated that fund sponsors should not use rule 485(a) which was done by Reality Shares’ proposal. The proposal falls under Investment Management (IM) due to the 40 Act filing, unlike bitcoin-specific ETFs filed by companies such as Bitwise and VanEck/SolidX. The proposals filed by other firms would be examined by the Division of Corporation Finance.

The attorney explained remarked that:
“IM reviews 485(a) filings and provides comments, but unlike filings for non-investment companies on Form S-1 … a 485(a) filing goes effective without action from IM. This is because there is no ‘delaying amendment’ that specifies that the filing will not go effective until approved.”

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