The SEC’s Office of Investor Education and Advocacy issued an alert urging investors to be cautious before investing in Initial Exchange Offerings through online trading platforms. SEC informed that IEOs might be subjected to registration requirements that apply to offerings under the federal securities laws.
IEO may be conducted in violation of federal securities laws.
The US SEC, in a statement on its website, wrote,“be cautious if considering an investment in an IEO. Claims of new technologies and financial products, such as those associated with digital asset offerings, and claims that IEOs are vetted by trading platforms, can be misused to entice investors with the false promise of high returns in a new investment space.”
It added that IEOs might be conducted in violation of the federal securities laws and lack many of the investor protections of registered and exempt securities offerings.
SEC asks investors to check if the trading platform is complying with laws.
The US SEC mentioned in its statement that the noncompliance with the federal securities laws means the IEO and trading platform may be operating unlawfully, and the investor and market protections and remedies these laws are intended to provide may be absent. It also urged investors to carefully consider whether the company and the trading platform involved in the IEO has complied with federal securities laws or not. The SEC had earlier warned that they might crack down on crypto exchanges that carry out IEOs.