Security Token Essentials : SEC compliance rules

[Ozark]

Security Token Essentials : SEC compliance rules

Hi, I am Dave Young from Cryptovest with another informational video on Security Tokens and what comes next.

Before we go looking deeper into the many parts of the upcoming security market that looks to explode, to understand the players, the markets, the trends, it is quite essential to understand the basic SEC compliance rules and classifications .

It is easy to take the next new platform’s whitepaper, telling you how easy they will make compliance but to understand the market, you need to know the underlying rules or the safe harbors.

What are the four categories that a Security Token can choose from ?

Regulation D - making the offering exempt from registration
Regulation S - excluding the offering from US
Regulations A+ - get registered with SEC for up to $ 50 million
Regulation Crowd Fund - which is capped at $ 1.07 million

And if you want you could have a hybrid of D + S for US and other markets.

Regulation D - 504 or 506c - allowing you to talk to US investors without SEC registration and approval

504 - gives you exemption from SEC registration as long as you keep the annual figure raised below $ 5 million. So not too relevant for the new Securities Market on a grand scale. Investors will also be locked in for a minimum of 1 year.

506c - an exemption if you only deal with accredited investors which in simple terms means high value/high earning individuals worth over a million dollars. Again, investors are locked in for a minimum of 1 year.

Even though the above might get SEC off your back, don’t forget that any state authorities might also have their own specific rules and come gunning for you, even if you are not registered there. If you take a look at the recent black comedy with Kraken Exchange calling New York State authorities a jilted lover, as they were still chasing them even after they deregistered and moved away, you can get a feel of the problems of zealous state regulators.

Regulation S - don’t deal with Americans!

If you have invested in ICOs, you are probably familiar with this, with the stringent KYC procedures to back it up but also you need to be showing active blocking of channels reaching US, ip filters etc. Of course if you chosing this option for Security Tokens you would need to pick a jurisdiction with good regulation or no-one is going to gamble their money just to get those elusive advantages.

Regulation A+ - long procedure up to $ 50 million

This is a lengthy procedure that requires a two year IPO-level CPA audit, many ICOs have previously applied for this but not many have achieved it. If achieved the tokens are not locked down for a year period.

At present Prometheum are applying for approval for a $ 50 million ICO to launch a ICO trading platform and Gab are applying for permission to run a STO under the framework for a social network offering, also in the system is dexCoin (a decentralized competitor to uber), Mandala, a digital asset exchange,

So hopefully you understand the basics a bit more and what a minefield dealing with regulations can be compared to the looser format of ICOs that has encouraged rapid growth, some explosive returns and many scams.