Listing on token and conventional stock exchanges

⇒ Reg D is a method to list the company on a major exchange.

⇒ In ICO that’s okay because you ‘re using the section 2 RG which is having to register the company as if it were a public company.

⇒ If the holder of record has 500 equity holders of record you have to register with the SEC.

⇒ If your token wasn’t registered whit the SEC and you’re selling in the aftermarket in the U.S you should avoid selling your token unless it is a utility token.

Reg D restricted securities

⇒ Reg D purchase would from a U.S investors that they aren’t able to sell that token until their holding period has passed.

⇒ The Reg D they sell to accredited only those people holding restricted securities.

⇒ The restricted securities don’t easily resell can’t sell it to the public because you need an exemption for that you register or find available exemption.

⇒You are going to have make sure that the smart contract is coded such that you know long it has been since the companies sold that security.

Combined Reg S and Reg D offerings

⇒ If the security of the token was issued subsequent to an SAFT that one year holding period starts when the token start, not at the beginning of the SAFT.

⇒ Reg S you can do a combined offering that is Reg D U.S investors and Reg S or international investors.

⇒ Reg S has safe harbors which say that if you comply with these conditions, you are for sure outside the U.S.

⇒ One of those conditions is no offers or sales in the U.S.

⇒ If you have a combination offer the Reg S metrics shouldn’t appear to a U.S investors they should see the Reg D metrics.

Token valuation

⇒ Always going to have risk factors.

⇒ In the case of a Reg A you need to have a financial statement for to indicate if this security that you’re offering is good or not.

⇒ In the ICO the risk factors leave the market take your decision here it doesn’t involve the SEC.

⇒ ICO adjust to who it is been to more conventional investors and also, we’ll see conventional metrics.

⇒ A company can issue a securitized security token and utility token.

Holding period, SAFT, Discount for early investors

⇒ You are not just going to know if someone in an anonymous blockchain situation is accredited or not, unless you have somehow coded everything to identify accredited persons in the initial offering and to whom they transfer on the blockchain.

⇒ The tacking period, the one year holding period, would start when the SAFT is issued as opposed to when it´s exercised.

⇒ If there is a SAFT involve and then later converts into a token that is a security, nor saying that the twelve-month holding period for the security starts when the SAFT is purchased.

⇒ The SEC is measuring how long the money´s been at risk so if you put the money up with the SAFT and then the SAFT converts in accordance with the algorithm set out in the SAFT then the tacking period applies.

⇒ Given the tender to practice in ICOs are offering discounts for early buyers, that is easier to do, delivering a similar equivalent in Reg D than it is in Reg A+, in Reg A+ as long as you avoid the 20% valuation change.

⇒ If you exceed 20% then you have to go back and might take a longer time to get approval from the SEC.

⇒ Selling a token in the YS as a security under Reg D but as a utility outside the US will depend on the laws of jurisdictions into which you are selling.

Can a Reg A+ ICO token be listed on cryptocurrency exchanges?

⇒ Under Reg A+ the tokens can be listed on crypto currency exchanges, not during the selling process but after the issuance of the tokens to the investors.

⇒ After that, they are allowed to trade them in the aftermarket and then they will typically be sold on crypto currency exchanges because that it’s the only easy place to do so.

⇒ For those exchanges you should make sure that they comply with registration or regulations of the place of operations.

Can you issue under Reg D and resell under 144A restricted to QIB?

⇒ Qualified institutional buyer 144 A it’s a rule which permits the trading of securities.

⇒ It was intended to address the trading of euro bonds.

⇒ You could absolutely issue under Reg D and sell under 144 A to QIBs.

Benefit of a US-company offering an ICO

⇒ There are cases where companies would be better off doing conventional offering because of the nature of what the total would end up being.

⇒ It would end up being boring to the ICO community of current investors.

⇒ They will be better to do a traditional offering than an ICO because sometimes it just does not fit, it ends up being more expensive and more time-consuming.

⇒ The primary reason for people leaning towards ICOs is that it looks like a much easier way to raise a large amount of money there are instances where that is clearly the case and that will be a long-term phenomenon, but not for the time being.

⇒ The token has to make sense for the company and it has to be appealing to the investors, one important tool to use is marketing.

⇒ Right now, people have propensity to buy into an ICO but that is changing with time.

What happens if someone transfers tokens to a non-accredited investor, under Reg D?

⇒ It could be that under certain circumstances a person could be treated as being an underwriter under securities, more being involved in the flow of securities from the issuer to the investing public without a registration, this is possible if the issuer took steps for it.

⇒ Coding into your smart contractor is a way to prevent or limit, and make sure that people know what the restrictions are, issuers should probably be okay in those circumstances, set it up properly from the beginning.

Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intends for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services.  This article cannot serve as a substitute for such professional services or advice.  Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation.  This article is subject to change at any time and for any reason.