Form 19b-4 is an important form used by self-regulatory organizations (SROs) in the United States to notify the Securities Exchange Commission (SEC) of a proposed rule change. Form 19b-4 is crucial in getting cryptocurrency ETFs approved.

Read on to find out what Form 19b-4 is, how it works, and its role in the listing and issuance of spot crypto ETFs.

What Is Form 19b-4?

Form 19b-4 is an application filed with the United States SEC to inform the regulatory body of a proposed rule change by a self-regulatory organization (SRO), such as a financial regulatory body like the Financial Industry Regulatory Authority (FINRA) or a stock exchange like the New York Stock Exchange (NYSE).

Many financial regulatory bodies and stock exchanges are self-regulatory organizations and are required by the SEC to file their bylaws, regulations, and rules for record-keeping purposes. 

Form 19b-4 is mandatory according to Rule 19b-4 under the Securities Exchange Act of 1934. For instance, any stock exchange intending to list a new product, such as a spot crypto ETF, must file Form 19b-4 with detailed information about the suggested rule change and its likely impact. 

All filed Form 19b-4 must contain all required exhibits and information, which should be presented clearly and understandably to enable the public to contribute meaningful comments on the suggested rule change and for the SEC to decide whether the submission is in line with the applicable rules and governing act. 

How Do Form 19b-4 Filings Work?

When a self-regulatory organization wants to change its regulations or rules, especially about trading, it must file Form 19b-4 with the SEC.

This also applies to the listing and issuance of new products.

In the application, the organization must clearly outline the latest rules and how the proposed rule change will uphold fair trading and offer investor protection. 

All 19b-4 fillings are filed in an electronic format via the Electronic Form 19b-4 Filing System (EFFS), which is a secure website managed by the SEC. Besides Form 19b-4, the system is also used to file Form 19b-7 and Systems Compliance Integrity (SCI).

Once Form 19b-4 is officially filed, the SEC review and regulatory process will be initiated. 

Following the filing of Form 19b-4, the SEC usually has 45 days (which can be extended to another 45 days) to review and approve or deny the proposed rule change. The SEC is at liberty to reject any 19b-4 filings if the information provided isn’t sufficient. In addition, the SEC will also invite public participation.

During the public comment period, other exchanges and the public can share their support or opposition to the suggested rule change. They can do this by submitting their written arguments and views, arguing for or against the rule change to the Securities Exchange Commission.

Nonetheless, it’s important to note that the SEC may not derive its decision from these comments since it largely relies on compliance and existing regulatory policies.

What Is the Role of the 19b-4 Filings in the Listing and Issuance of Spot Crypto ETFs?

19b-4 filings are crucial in the listing and issuing of spot cryptocurrency ETFs.

Any stock exchange in the United States that needs to list and issue a Bitcoin or Ethereum ETF must first file Form 19b-4, which would detail how the ETF would comply with regulatory rules and function.

The approval of a Form 19b-4 filing for a spot crypto ETF, such as the approved Bitcoin ETFs by the SEC, ensures that spot crypto ETFs can be traded in various stock exchanges. 

This makes it possible for spot crypto ETFs to offer a gateway for investors to diversify their investments and gain direct exposure to bitcoin (BTC) without owning the underlying asset. Moreover, the cryptocurrency community usually monitors 19b-4 filings for spot crypto ETFs as their approvals signify the acceptance of digital currencies in the mainstream. 

In addition, Form 19b-4 ETF filings ensure that investors can confidently invest in spot crypto ETFs, which are regulated and thus arguably less risky compared to buying actual cryptocurrencies on crypto exchanges.

19b-4 filings are also essential in attracting new institutional investors and increasing the stability and legitimacy of Bitcoin and other digital currencies. 

If you want to dig deeper into why 19b-4 ETF filings are important for spot crypto ETFs, check out our Unchained podcast episode, Why Spot Ether ETFs Are Now Likely to Be Approved on Thursday.

What Is the Difference Between Form 19b-4 Filings and S-1 Filings?

Besides the 19b-4 filings, the SEC also requires self-regulated organizations (SROs) to file Form S-1 before a spot crypto ETF can start trading.

The 19b-4 is a form filed with the SEC when there is a proposed rule change. On the other hand, Form S-1 is a registration statement that the SEC requires public companies operating in the United States to file to offer new securities publicly. 

The S-1 filings for spot crypto ETFs usually include information on the fund’s current business model and how the product will work, including fees and impact on other listed funds.

Spot crypto ETFs cannot commence trading unless Form S-1 is filed and approved by the SEC, along with Form 19b-4. 

Unlike 19b-4 filings, which the SEC has up to 90 days to decide on, S-1 filings have no deadline and can take anywhere from a few weeks to several months for the SEC to approve. The timelines are usually dependent on the completeness of the S-1 filing and the nature of the entity’s business. 

The Bottom Line

Form 19b-4 is used by self-regulatory organizations in the United States to inform the Securities Exchange Commission of any changes to their rules. It also allows for public participation before a decision is reached in alignment with the Securities Exchange Act of 1934. 

Form 19b-4 filings are essential in getting spot crypto ETFs approved, enabling investors to invest in cryptocurrencies without having to own the underlying asset directly. 

So far, the SEC has already approved 19b-4 filings for various Bitcoin ETFs and Ethereum ETFs. This is expected to set the pace for other cryptocurrencies keen on establishing their own ETFs.