Securities Law Section

Message from the Chair

Section Chair:

Charles Niemeier
Williams & Connolly LLP
Washington, D.C.

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The Federal Bar Association - Securities Law Section is a proud sponsor of the virtual museum and archive of the history of financial regulation at this year. While the museum is free and accessible to everyone at all times, the Section will highlight specific material and information within the museum on securities law issues in the coming months, providing current and prospective Section members with unique content and context for use at any time.
By now, everyone has probably heard that Tyler and Cameron Winklevoss, best known for their legal battles with Facebook founder Mark Zuckerberg, had plans for an exchange traded fund (ETF) tied to the value of Bitcoin.   However, on March 10, the SEC denied the Bats BZX Exchange’s application to list and trade shares of the proposed ETF.  The twins insist that this setback will only send them back to the drawing board, but they are unlikely to get a better decision any time soon.  In its order, the SEC cited the unregulated nature of the Bitcoin markets in general and the inability of the Bats BZX Exchange to safeguard against potential fraud in those markets.  While the Bitcoin ETF’s trading debut has been delayed indefinitely, the success of ETFs as an investment vehicle is hard to ignore. 

In their short history, ETFs have grown tremendously in popularity and complexity. The first ETF was the State Street Global Advisor S&P 500 Depository Receipt (SPDR) that began trading on the American Stock Exchange in 1993.  Unlike mutual funds which sold at a net asset value determined once a day, ETFs were traded just like stocks and bonds.  But, like mutual funds, they were subject to the 1940 Act and so had to apply to the SEC for an exemption just to exist.  In early 2008, the SEC proposed allowing certain ETFs to go on the market without a specific exemption, but the financial crisis sidetracked the move. 

Since then, both the SEC and FINRA have expressed concerns about the increasingly complex nature of “reverse” and “leveraged” ETFs, especially since global ETF assets are now valued at approximately $3 trillion dollars.  It is likely that the SEC decision was easy to make given the novelty and unpredictability of Bitcoin—remember the Mt. Gox collapse.  It is certain that securities lawyers will soon be diving deeper into these complexities as virtual currencies take a firmer foothold in the market.   


The Source: June 2017

The Source: March 2017

The Source: December 2016

The Source: September 2016

The Source: June 2016

The Source: March 2016

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