MoFo Guides First SEC-Approved Fund Issuing Digital Tokens

Law360 featured MoFo’s role representing Arca in its launch of the first ever U.S. Securities and Exchange Commission-registered closed-end fund to offer digital securities, which combines innovative technology with the regulatory oversight of traditional finance. The team that represented Arca was co-led by Kelley Howes and Susan Gault-Brown, assisted by associates Dylan Naughton and Kristofer Readling.

Kelley told Law360 that some of the regulatory benefits of the fund being registered under the Investment Company Act of 1940 are that it will be overseen by a board of independent trustees, it has adopted a regulatory compliance program and appointed a chief compliance officer, and it’s required to provide shareholders with transparency into portfolio holdings every so often.

“That’s different than other assets that can be traded using blockchain technology today, and may be attractive to participants in the digital economy,” Kelley said.

Kelley added that one of the biggest challenges in navigating regulatory approval for the fund was figuring out the interface between the SEC-registered transfer agent, which keeps shareholder records, and the blockchain record of peer-to-peer transactions.

“Making sure that the respective roles were accurately documented was important not only from a shareholder perspective, but also from a regulatory perspective.”

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