SEC Division of Investment Management Staff Publishes Public Statement on Funds Registered …

On May 11, the Securities Exchange Commission’s strongly encouraging any investor interested in investing in mutual funds exposed to the Bitcoin futures market to carefully consider the risks involved with such investments.

The Statement also summarized IM staff’s prior guidance from its Engaging on Fund Innovation and Cryptocurrency Related Holdings Letter from January 2018 , and potential manipulation and other potential risks of cryptocurrency-related markets.

IM staff expect this monitoring will include, among other things, analyzing the liquidity and depth of the Bitcoin futures market, analyzing mutual funds’ ability to liquidate Bitcoin futures positions to meet daily redemption demands, monitoring funds’ valuations of holdings in the Bitcoin futures market, considering mutual funds’ liquidity classification of any position in the Bitcoin futures market including the basis for those classifications, assessing the ongoing impact of the potential for fraud or manipulation in the underlying Bitcoin markets, and considering whether the Bitcoin futures market could accommodate ETFs.

IM staff concluded by emphasizing that only mutual funds with appropriate strategies supporting this type of investment and full disclosure of material risks should invest in the Bitcoin futures market at this time.

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