The fact that the government is now monitoring the behavior of the SEC is certainly not a new development, but this time around the SEC is looking at the behavior of its own members. Is DeFi next on the SEC’s watchlist?
DeFi, otherwise known as “Delfi Capital,” was recently formed by five venture capitalists in order to provide a unique investment vehicle for small businesses. According to SEC guidelines, any new investment fund that is under the control of a CEO or Board of Directors must be reviewed and approved by the SEC. However, the SEC only reviews new investment funds if they meet the specific criteria laid out in the guidelines.
What are the criteria for approval? The SEC requires that DeFi must meet a number of very specific requirements before it can be approved. First, it must have at least $1 million in assets under management. Second, it must not be owned or controlled by any current or former officers, directors, or shareholders of the company.
In addition, DeFi must have an independent board consisting of at least two independent directors. This board must meet at least once every twelve months, and its meetings must be recorded. The board must be comprised of at least three independent directors, who are at least 55 years old, and who are not relatives of the company.
While the SEC will review DeFi’s activities, the SEC cannot directly regulate DeFi’s activities. This means that DeFi’s activities will be limited to the activities that are outlined in the guidelines. This means that DeFi is still subject to the same types of regulation as other investment funds, including SEC rules regarding the minimum amount of capital and other fees.
The SEC is not the only organization that DeFi has to worry about though. In order to meet the SEC’s guidelines, DeFi must engage in an active investment management program, as well as a compliance program that focus on disclosure of material financial information. The SEC will not be inspecting DeFi’s board meetings, however, because it is the company that will be responsible for ensuring that these meetings are recorded. In addition, the company compliance officers will need to ensure that the officers of DeFi’s management are aware of their responsibilities to the company’s financial statements.
DeFi’s activities will also be scrutinized by the SEC’s Office of Investor Education and Advocacy, which is responsible for monitoring the investment industry and making sure that the rules and regulations that are currently in place are being followed. OIA’s activities are not limited to examining the activities of DeFi, but they do oversee the activities of all investment fund companies, including their compliance with SEC rules.
DeFi’s status as an investment fund does not mean that the company is exempt from SEC rules. In order to ensure that DeFi continues to be an asset for the market, the SEC will be monitoring the activities of all companies that provide such funds.