May I respectfully ask how many of you know the difference between an “ICO” and a Reg. A+ Mini-IPO? Don’t feel embarrassed if you don’t know. Many professionals, and VC guys, who should know, are clueless. That will continue to hunt our industry – perpetuate bad advice and misinformation while charging their clients for a lot of money.
As they are currently structured ICOs (Initial Coin Offerings) cannot and have not been registered with the SEC or in compliance with state blue-sky laws. The sale of securities that is not registered or exempt with the SEC is illegal. However, it is perfectly legal to limit the investment to only accredited investors with a filing of a private placement memorandum, like Reg. D 506 (c) with the SEC. But by itself, that limits the number of participating investors, not enough, if the objective is to launch a coin with massive participation to get it listed on an exchange and get the price to the moon. I am beginning to take notice of a second wave of ICOs taking place using this combination. To me the legal exposure remains. And, I agree with the author that, “much of the ICO activity in the US was completed in total disregard to existing securities law.”
“Feit says Reg A+ may be the solution that ICO issuers need but, again, this securities exemption is not without certain requirements that take both time and money.”
In contrast to ICO, Reg. A+ Mini-IPO Title IV Tier 2 of the JOBS Act is a “Qualified” exemption with the SEC to raise up to $50 million from accredited and non-accredited investors worldwide with general advertising. However, it is very time consuming and expensive and no funding can be excepted until the filing is “Qualified” by the SEC.
In our case, it involves the sale of DNotes Global, Inc. common shares. It does not involve any DNotes. It is important to keep DNotes as a digital currency token that has never been sold as a “security” or participated in any ICOs.
Investor can invest in one or both of our projects and still get the benefits of our cross ownership. We are often unique because we are willing to bear the cost and take the time to do the right thing.
Ryan Feit from SeedInvest: Crypto Securities Regulation 101
During the 2018 LendIt Fintech conference in San Francisco this week, SeedInvest CEO Ryan Feit delivered a presentation on the current state of securities regulations in regards to initial coin offerings (ICOs).
Until recently, much of the ICO activity in the US was completed in total disregard to existing securities law. Comments emanating from the Securities and Exchange Commission (SEC) clarified their view that pretty much all ICOs were securities and needed to file for an appropriate securities exemptions. One of the most compelling aspects of tokens issued during an ICO is the fact that typically soon after the minting of these digital coins they could be traded on a crypto-exchange thus creating immediate liquidity. This creates another significant hurdle for issuers who want to remain compliant in the eyes of the SEC (and CFTC) as the exchanges are not regulated and these tokens are being viewed as securities.
Feit, who has been in the securities crowdfunding space for some years now, points to two of the biggest challenges in the ICO market;
“The biggest challenge to launching successful token offerings in a regulated environment will be secondary market liquidity,” said Ryan Feit, CEO & Co-Founder of SeedInvest. “The crypto community is going to need to figure out a number of securities issues that nobody is talking about such as Blue Sky and 12(g).”
The 12(g) rule has to do with a severe limit on the number of token holders of record and a trip wire on assets above $10 million. If you trigger 12(g) the SEC expects you to become a reporting company like companies traded on public exchanges. That is a problem.
Blue Sky references the need to kiss the ring of every single state regulator before you trade securities on an exchange. Feit says Reg A+ may be the solution that ICO issuers need but, again, this securities exemption is not without certain requirements that take both time and money.
Source:
https://www.crowdfundinsider.com/2018/04/131732-ryan-feit-from-seedinvest-crypto-securities-regulation-101/