Legal Compliance

When Security Tokens are done correctly, they don’t skirt laws & regulations, they remove financial institutions and middlemen.

This is because Security Tokens are subject to federal securities regulations — they are compliant from day one. There are three regulations in the Securities Act of 1933 that every person should be aware of when looking at US-based Security Tokens: Regulation D, Regulation A+, and Regulation S.

Regulation D — This allows an offering to avoid being registered with the SEC, but requires an electronic filing of “Form D” after the securities have first been sold. The individuals offering the security may generally solicit investors for an offering that meets the requirements of Section 506c, which requires verification that the investors are accredited and the information provided during the solicitation must be “free from false or misleading statements.” In most cases, investors who purchase a Regulation D offering may not sell their ownership stake for at least 12 months after their initial purchase.

Regulation A+ — This exemption allows an issuer to offer a security qualified with the SEC to non-accredited investors through general solicitation for up to a total of $50,000,000 in investment. Due to the requirement to register the security, Regulation A+ issuance can take longer compared to other options. Regulation A offerings require qualification of a Form 1-A offering circular, including audited financials. Due to the requirement to qualify the security and complete an audit, Regulation A+ issuance can cost more and take longer compared to other options. Regulation A+ offerings treat all money raised as revenue and tax it as such if the money doesn’t represent equity in the underlying company.

Regulation S — This is when an offering of securities is deemed to be executed in a country other than the US and therefore not subjected to the registration requirement under section 5 of the 1933 Act. Issuers of the security are still required to abide by the security regulations in each country where they offer their security.

Disclaimer: The above summaries of US securities law, including Regulations A+, D, and S, are merely my personal opinion. They should not be construed as legal or investment advice and you should consult a lawyer for any and all questions you have.

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Disclaimer: Information contained herein is provided without considering your personal circumstances, therefore should not be construed as financial advice, investment recommendation or an offer of, or solicitation for, any transactions in securities tokens or any other cryptocurrencies.