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Security tokens: Misconceptions and Benefits (theblockcrypto.com)
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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents the PEC tokens, as described in The Elephant's White Paper have not been registered under any securities laws in any jurisdiction (together with the Act, the “Securities Laws”), but rather are being and will be allocated by The Elephant pursuant to exemptions from registration under the Securities Laws.

Accordingly, the undersigned gives the following representations and warranties:

• It has the knowledge and experience in financial and business matters required to receive and use the PECs and/or services to be made available by THE ELEPHANT, as described in the White Paper, as amended from time to time, and as such it is capable of evaluating the merits and risks involved with them.

• The purpose of this declaration is to enable THE ELEPHANT and its affiliates to discharge its responsibilities under such exemptions and that THE ELEPHANT will rely upon the information contained herein, and therefore, the representations herein are complete, accurate and binding, and may be relied upon by THE ELEPHANT and its affiliates.

• Although THE ELEPHANT will use their best efforts to keep this letter strictly confidential, they may present this declaration and any other information which the undersigned has provided to them to such parties as they deem advisable if called upon to establish the availability under the Securities Laws of an exemption from registration of the offer and sale of the PEC or any other service to be made available by THE ELEPHANT, as described in the White Paper, as amended from time to time, or if the contents thereof are relevant to any issue in any action, suit or proceeding to which THE ELEPHANT or its affiliates is a party or by which they or it are or may be bound.

• Any offer or services that may be made available to the undersigned by THE ELEPHANT or its affiliates (i) will not constitute a violation of any laws or regulations, including the Securities Laws and investment advice laws, of any applicable jurisdiction; (ii) will be permissible under all applicable Securities Laws and shall not trigger any licensing, registration, or other requirements.

• It shall not transmit or otherwise send any information to which THE ELEPHANT will give it access to, to any person in any jurisdiction in which the distribution of such information and/or the offering or services to be offered by PEC are not authorized, or to whom such offer or invitation may be unlawful.

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that it is a “sophisticated investor” or a “professional investor” and a “wholesale client” (and not a “retail client”) as defined under the Corporations Act (Cth) 2001

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that:

1. Any fiat currency used by the undersigned in connection with the offering and services to be made available by The Elephant, as described in its White Paper and associated commercial terms, as changed from time to time, is legally owned by the undersigned and not raised from any other parties.

2. In respect of the transaction made in connection with these offering and services, it has not obtained any access to the relevant transaction information in a press release, conference, advertisement, announcement, professional or trade publication or marketing materials within the People’s Republic of China.

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that it has made appropriate enquiries and has full knowledge of the nature, rights and obligations arising out of the offering or the services made available by The Elephant, as described in its White Paper and associated commercial terms, as changed from time to time, and obligations applicable to it under the laws of the Arab Republic of Egypt, and will not make any offerings, disposals, investments or otherwise transact with regard to offering or the services made available by The Elephant in case such offering, disposal, investment or other transaction is in contravention to the laws, regulations, governmental circulars and decrees of the Arab Republic of Egypt.

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that it is located or resident in the European Economic Area (the “EEA”), it is a “qualified investor” within the meaning of the law in any member state of the EEA which has implemented the Directive 2003/71/EC, and amendments thereto, including Directive 2010/73/EC (the “Prospectus Directive”), implementing Article 2(1)(e)(i), (ii) or (iii) of the Prospectus Directive.

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that it is a “qualified investor” within the meaning of Directive 2003/71/EC, as amended, and it professionally or commercially purchases or sells securities or investment products (Vermögensanlagen) within the meaning of the German Investment Product Act (Vermögensanlagengesetz) for its own account or for the account of others.

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that it is a “qualified investor” as such term is defined in the Prospectuses Act 2005 of Gibraltar (as amended) and in Directive 2003/71/EC. It is a “professional client” as such term is defined in the Financial Services (Markets in Financial Instruments) Act 2006 of Gibraltar; and that it has not requested “non-professional treatment” within the meaning of Schedule 2 of the Financial Services (Markets in Financial Instruments) Act 2006 of Gibraltar.

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that it is a professional investor (as such term is defined in Part 1 of Schedule 1 to the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong)).

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that it is:

1. An Investor to which at least one of the categories set forth in the First Addendum to the Israeli Securities Law, 1968 (the "Securities Law") and as listed below apply (a "Sophisticated Investor"); and

2. aware of the implications of being a Sophisticated Investor, and agree thereto.

The categories are:

1. A Joint Investment Trust Fund, as such term is defined in the Joint Investments Trust Law, 1994, or a management company of such a fund;

2. A Provident Fund or a Management Company as such terms are defined in the Control of Financial Services Law (Provident Funds), 2005;

3. An Insurer, as defined in the Insurance Supervision Law, 1981;

4. A Banking Corporation or an Auxiliary Corporation, as such terms are defined in the Banking (Licensing) Law, 1981, other than a joint services company, acquiring for their own account or for the account of clients which are investors who fall within the categories listed in Section 15A(b) of the Securities Law;

5. A Portfolio Manager, as such term is defined in Section 8(b) of the Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 1995 (the "Investment Advice Law"), acquiring for its own account or for the account of clients which are investors who fall within the categories listed in Section 15A(b) of the Securities Law;

6. An Investment Adviser or an Investment Marketer, as such terms are defined in Section 7(c) of the Investment Advice Law, acquiring for its own account;

7. A member of the Tel Aviv Stock Exchange acquiring for its own account or for the accounts of clients which are investors who fall within the categories listed in Section 15A(b) of the Securities Law;

8. An Underwriter, as such term is defined in section 1 of the Securities Law, that meets the qualifying conditions according to Section 56(c) of the Securities Law, acquiring for its own account;

9. A Venture Capital Fund; for this purpose, a “Venture Capital Fund” means a body corporate the main activity of which is investment in bodies corporate whose main activity, at the time of the investment, is research and development or the production of innovative and knowhow intensive products or processes, investment in which involves greater risk than what is customary in other investments;

10. A body corporate wholly owned by investors that fall within the categories listed in section 15A(b) of the Securities Law;

11. A body corporate, other than a body corporate incorporated for the acquisition of securities from a certain offer, with an equity capital in excess of NIS 50 million;

12. An individual, investing for his or her own account:

a. The total value of his or her Liquid Assets exceeds NIS 8 million;

b. His or her annual income in each of the previous two years exceeds NIS 1.2 million, or 1.8 million for a Family Unit; or

c. The total value of his/her Liquid Assets exceeds NIS 5 million and his/her annual income in each of the previous two years exceeds NIS 600,000 for an individual, or NIS 900,000 for a Family Unit.

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that it is a “wholesale investor” as that term is defined in clauses 3(2)(a), (c) or (d) of Schedule 1 to the Financial Markets Conduct Act 2013 of New Zealand (“FMC Act”), being a person who is

☐ an “investment business”;

☐ “large”; or

☐ a “government agency”,

in each case as defined in Schedule 1 to the FMC Act.

2. The undersigned understands the consequences of certifying itself to be a wholesale investor.

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that it is an “institutional investor” as defined under the Decree-Law 1 of 1999 and Accord 1 of 2001, both as amended, in relation to whom the registration of the securities to be offered and sold is not required. Pursuant to the foregoing, the undersigned (i) is a legal entity, validly formed and in existence, (ii) has participated, on a regular basis, in at least the previous two years, in the administration of investments substantially similar to those described in The Elephant White Paper, (iii) has a net worth of at least one million dollars, (iv) has key executives or, a majority of its directors and officers, that have at least two years of experience in the regular administration of investments and (v) does not require the protection of the provisions set forth in the securities laws of the Republic of Panama.

The undersigned acknowledges that the securities have not been registered under the Panamanian securities laws and regulations and may not be offered or sold within Panama except pursuant to an exemption from, or in transactions not subject to, the registration requirements of the Panamanian securities laws and regulations.

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that it is a “qualified investor” within the meaning of the Federal Law of the Russian Federation “On Securities Market” No. 39-FZ dated April 22, 1996, as amended, (ii) the execution and performance of the offering and services to be made available by The Elephant, as described in its White Paper and associated commercial terms, as changed from time to time, do not violate applicable laws of the Russian Federation and (iii) in making any payments in connection with offering and services, it has complied or will comply with the requirements of all applicable laws of the Russian Federation, including with respect to foreign currency transactions. The undersigned acknowledges that the The Elephant is relying in part upon the truth and accuracy of, and the undersigned's compliance with, the representations, warranties, agreements, acknowledgements and understandings of the undersigned set forth herein in order to determine its eligibility to gain access to as PrivatEquity's offering and services, as described in its White Paper and associated commercial terms, as changed from time to time and the undersigned is aware of the legal consequences of the foregoing.

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that it is either an “institutional investor” as defined under Section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“SFA”) or a “relevant person” as defined under Section 275(2) of the SFA (including an “accredited investor” as defined under Section 4A(1) of the SFA).

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that it is an “investment professional” within the meaning of Article 11(1) of the Enforcement Decree of the Financial Investment Services and Capital Markets Act of South Korea.

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that it is a “qualified investor” within the meaning of the Swiss Collective Investment Schemes Act of June 23, 2006, as amended, its implementing ordinance and regulatory guidance.

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that it is located or resident in the United Kingdom, it is a person of a kind described in Articles 19 and/or 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), or that the offering or the services made available by The Elephant, as described in its White Paper and associated commercial terms, as changed from time to time, may otherwise be lawfully distributed to it pursuant another applicable exemption under the Order.

The undersigned acknowledges that these offering and services are only directed at (i) persons who have professional experience in matters relating to investments who fall within the definition of "investment professionals" in Article 19(5) of the Order, (ii) high net worth entities (including companies and unincorporated associations of high net worth and trusts of high value) or other persons falling within Article 49(2)(a) to (d) of the Order, and (iii) persons to whom such offering and services may otherwise be lawfully distributed.

PLEASE NOTE EXTERNAL CONFIRMATION AND/OR EVIDENCE MAY BE REQUIRED BEFORE THE ACCREDITAION PROCESS IS COMPLETED

By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents that it is an “accredited investor” (an “Accredited Investor”) as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended, for one or more of the reasons specified below:

 Where the undersigned is a natural person:

 He or she has an individual net worth, or joint net worth with my spouse (determined by (i) subtracting total liabilities from total assets, and (ii) excluding the value of my primary residence), in excess of $1,000,000; and/or

 He or she had an individual income in excess of $200,000 (or a joint income together with my spouse in excess of $300,000) in each of the two most recently completed calendar years, and reasonably expects to have an individual income in excess of $200,000 (or a joint income together with my spouse in excess of $300,000) in the current calendar year.

 Where the undersigned is or acting on behalf of:

 a corporation, partnership, limited liability company or similar business trust or organization described in Section 501(c)(3) of the Internal Revenue Code not formed for the specific purpose of acquiring the Tokens that has total assets in excess of $5,000,000;

 a bank as defined in Section 3(a)(2) of the Securities Act, a savings and loan association, or other institution defined in Section 3(a)(5)(A) of the Securities Act acting in either its individual or fiduciary capacity (this includes a trust for which a bank acts as trustee and exercises investment discretion with respect to the trust’s decision to invest in the Token);

 a broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended;

 an insurance company as defined in Section 2(13) of the Securities Act;

 an investment company registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), or a business development company as defined in Section 2(a)(48) of the Investment Company Act;

 a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended;

 a plan established and maintained by a state, its political subdivisions, or an agency or instrumentality of a state or its political subdivisions, for the benefit of employees, having total assets in excess of $5,000,000;

 an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), (a) for which the investment decision to acquire the Tokens is being made by a plan fiduciary, as defined in Section 3(21) of ERISA, that is either a bank, savings and loan association, insurance company, or registered investment adviser, (b) which has total assets in excess of $5,000,000, or (c) which is self-directed, with the investment decisions made solely by persons who are Accredited Investors;

 a private business development company defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended;

 a trust not formed for the specific purpose of acquiring the Tokens with total assets in excess of $5,000,000 and directed by a person who has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of investing in the Tokens;

 a revocable trust (including a revocable trust formed for the specific purpose of acquiring the Tokens) and the grantor or settlor of such trust is an Accredited Investor; and/or

 an entity in which each equity owner is an Accredited Investor.

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents the PEC tokens, as described in The Elephant's White Paper have not been registered under any securities laws in any jurisdiction (together with the Act, the “Securities Laws”), but rather are being and will be allocated by The Elephant pursuant to exemptions from registration under the Securities Laws.

Accordingly, the undersigned gives the following representations and warranties:

• It has the knowledge and experience in financial and business matters required to receive and use the PECs and/or services to be made available by THE ELEPHANT, as described in the White Paper, as amended from time to time, and as such it is capable of evaluating the merits and risks involved with them.

• The purpose of this declaration is to enable THE ELEPHANT and its affiliates to discharge its responsibilities under such exemptions and that THE ELEPHANT will rely upon the information contained herein, and therefore, the representations herein are complete, accurate and binding, and may be relied upon by THE ELEPHANT and its affiliates.

• Although THE ELEPHANT will use their best efforts to keep this letter strictly confidential, they may present this declaration and any other information which the undersigned has provided to them to such parties as they deem advisable if called upon to establish the availability under the Securities Laws of an exemption from registration of the offer and sale of the PEC or any other service to be made available by THE ELEPHANT, as described in the White Paper, as amended from time to time, or if the contents thereof are relevant to any issue in any action, suit or proceeding to which THE ELEPHANT or its affiliates is a party or by which they or it are or may be bound.

• Any offer or services that may be made available to the undersigned by THE ELEPHANT or its affiliates (i) will not constitute a violation of any laws or regulations, including the Securities Laws and investment advice laws, of any applicable jurisdiction; (ii) will be permissible under all applicable Securities Laws and shall not trigger any licensing, registration, or other requirements.

• It shall not transmit or otherwise send any information to which THE ELEPHANT will give it access to, to any person in any jurisdiction in which the distribution of such information and/or the offering or services to be offered by PEC are not authorized, or to whom such offer or invitation may be unlawful.

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By filling in this form and selecting the 'I confirm' button below, the undersigned hereby confirms and represents the information above does not qualify as a recommendation or an opinion with regard to conducting any transaction or investment. Each investor should conduct his or her own checks and verifications, while taking into account his or her specific circumstances and requirements. All the relevant aspects of the purchase, including the legal, economic and tax aspects, should be carefully examined with the assistance of professionals and consultants on the investor’s behalf.

The information above or on the site and the blog does not qualify as an offer of investment and is meant for general information only. Offers for selling of the securities will be delivered only to ‘Accredited Investors‘ as defined in the first supplement of the Israeli Securities Law, 5728-1968. The Elephant, shall not be responsible or liable and shall not guarantee in any way the return of the investments to investors, including any profits earned as a result of such investments. The engagement with the investors shall be in accordance with the transaction documents and the conditions stipulated therein, subject to the negotiations that will be held with the investors.

The Elephant charges fees from sellers and buyers of securities, and therefore The Elephant has an interest in the information posted about various companies.

The information published on the Site, does not constitutes an investment consulting as defined in the Regulation of Investment Consulting, Investment Marketing and Portfolio Management, 1995, and the said information is not a substitute for professional consulting which among others takes into consideration the special needs of every person.

For those who are considering making an investment (including sale and purchase of securities) via the website, can apply different laws deriving from their residence or citizenship, including tax laws, laws relating to the statement or report on investment activity, laws relating to the eligibility of investing, regulatory issues in process and so on. Therefore, those who are considering making such an investment, undertake to examine the applicability of any applicable laws, as they are committed to take all necessary action in order not to violate the said laws, including to disclose fully and fairly in relation to any investment to any local lawfully authority, as the law requires such disclosure.

We welcome you to The Elephant Investors Community, your gateway to the Secondary Market.

Note:
The provision of information in this website is not based on your individual circumstances and should not be relied upon as an assessment of suitability for you of a particular product, service, or transaction. It does not constitute investment advice, tax advice or legal advice and The Elephant Platform makes no recommendation as to the suitability of any of the products, services or transactions mentioned herein. The information included in this website is intended to “Accredited Investors” only, as this term is defined in the jurisdiction in which they reside (or such similar term in such jurisdictions financial regulations). Non-Accredited investors may not partake in any products, services or transactions mentioned herein or offered by The Elephant.


* Please note that the purchase of the shares of any Target Company may be subjected to right of first refusal of other shareholders, in some cases also to approval of the Target Company’s board of directors or other transfer restrictions as may be applicable.

Security tokens: Misconceptions and Benefits (theblockcrypto.com)
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For those who are considering making an investment (including sale and purchase of securities) via the website, can apply different laws deriving from their residence or citizenship, including tax laws, laws relating to the statement or report on investment activity, laws relating to the eligibility of investing, and so on. Therefore, those who are considering making such an investment, undertake to examine the applicability of any applicable laws, as they are committed to take all necessary action in order not to violate the saids laws, including to disclose fully and fairly in relation to any investment to any local lawfully authority, as the law requires such disclosure.

Security tokens: Misconceptions and Benefits (theblockcrypto.com)

Published in TheBlock | March 15, 2019, By by Contributor Network

The benefits of security tokens (also known as “digital securities,” “smart securities” or “programmable securities”) for issuers and investors have been written about at length. However, the benefits described often confuse the benefits of crowdfunding and other existing market dynamics with those of security tokens. In this article, we will attempt to provide clarity around the benefits of security tokens issued by private companies relative to the current market for private securities and misconceptions around security tokens.


Misconceptions

#1: Security tokens give access to a global pool of capital. Access to capital from around the world was available for a long time before security tokens. As remains the case with sales of security tokens, investment documents are prepared and circulated to investors who sign them electronically. Laws are what permit more or less access to global capital and determine from which jurisdictions around the world issuers can raise capital. U.S. companies have been able to raise capital globally under Regulation S for decades. Most non-U.S. jurisdictions have similar laws that permit (or do not prohibit) capital to be raised globally. The sale of security tokens has not extended the reach of companies to raise capital outside of the jurisdiction of their incorporation.

Security tokens are not what make it possible or even more efficient to raise capital globally.

#2: Security tokens allow companies to sell securities to U.S. non-accredited investors.Securities laws are the only thing stopping companies from raising capital from non-accredited investors. Selling security tokens does not change those laws. Just as before the emergence of security tokens, the only way U.S. companies can sell securities to U.S. non-accredited investors in a general solicitation is through a registered offering (e.g., an IPO) or an exempt offering (e.g., Regulation A+, Rule 506(c) or Regulation CF). Companies can also sell securities to non-U.S., non-accredited investors under Regulation S so long as the sale is permitted in the jurisdiction where the person resides.

Security tokens are not what makes it possible or even more efficient to raise capital from U.S. non-accredited investors.

#3: Security tokens enable 24/7 trading of private securities. Private securities could always be traded 24/7. Two people could meet for coffee at midnight, sign transaction documents and pay and receive payment for the private securities. There is no doubt that transacting in that manner is slow and inefficient, but it could be done 24/7. Conversely, when public companies begin to issue security tokens, subject to potentially problematic regulations of exchanges and exchange rules, we should begin to see 24/7 trading of public securities, which was not previously possible because intermediaries could not make the transactions happen at all hours of the day.

Security tokens are not what make it possible to trade private securities 24/7.

#4: Security tokens reduce the cost of issuing securities. The issuance of securities, whether it be traditional off-chain securities in tokenized form or native on-chain securities, will not be cheaper. Legal documents, such as private placement memoranda and purchase agreements, along with advisor fees, such as for legal and tax advice and broker-dealer placement agents, will not change. In the short term, those fees have been and will continue to be higher than with traditional securities. In the long term, those fees will be the same as for offerings of securities in their traditional form unless regulators determine less disclosure is required, which is highly unlikely.

Security tokens are not currently resulting in reduced issuance costs.

#5 Security tokens create liquidity for private securities. Private securities can already trade in secondary markets but the necessary infrastructure for that trading has never been developed in the same way it is currently being developed for security tokens. For example, buy and sell orders of traditional securities could be matched on an alternative trading system, which is the same type of “exchange” used for security tokens. However, because of other market factors and investor interest, that infrastructure was never fully developed to create a robust market in private securities.

Security tokens are not what creates liquidity for private securities.

#6: Security tokens enable fractional ownership of real-world assets. Real-world assets can already be fractionalized simply using a few pieces of paper that state what percentage of an asset each person owns. A perfect example is when people hold real estate as tenants in common, which is a form of ownership in which multiple people own a direct interest in the real estate. In addition, although it is atypical, fractional shares of stocks are permitted in most jurisdictions. Thus, fractional ownership of real-world assets is currently possible but inefficient.

Security tokens are not what enables fractional ownership of real-world assets.


Real Benefits

#1: Security tokens will enable greater liquidity than traditional securities. Although security tokens do not create liquidity for private securities, they do enable increased liquidity. This is due to the frictionless transfer of security tokens and potential for removal of intermediaries that are either currently necessary or convenient in connection with a transfer of traditional securities. Before liquidity in security tokens increases, several pieces of infrastructure are required, some of which are far along in development and use, and others that do not appear to be focused on much by the community.

#2: Security tokens will enable the more efficient and cost-effective transfers of fractional interests in real-world assets. When anyone currently wants to sell a fractional interest in a real-world asset, it is a slow, time consuming and expensive process. When combined with the potential greater liquidity of security tokens, the transfer of fractional interests through security tokens will be much more cost-effective and efficient. It will make what used to be a nonviable option both viable and common, which will unlock greater value than currently exists in fractional interests of real-world assets.

#3: Security tokens will ensure greater compliance with laws. Securities and other laws around the world are highly complex when dealing in financial instruments like securities. Some of them allow secondary trading of private securities, others do not. Some of them require time to pass before secondary trading of private securities is permitted, others do not. Some of them put limits on who can sell private securities and how much of them can be sold in secondary markets, others do not. With smart contracts coded with the applicable securities and other compliance requirements globally governing the trading of security tokens, companies can ensure that their securities are always trading in compliance with applicable laws.

#4: Security tokens will enable more efficient cross-border trading. Cross-border trading of securities has always been expensive and time-consuming because each individual seller and buyer hires legal counsel and other parties to enable the trade to ensure compliance with laws and avoid fraud. With smart contracts governing the compliance functions of security tokens and ensuring receipt of payment for the securities, those tokens can flow cross-border seamlessly with the costs of compliance being spread across all market participants by the companies building the smart contracts used to govern trading.

#5: Security tokens will enable better cap table management. Cap table management is recognized as one of the biggest issues facing early-stage companies. Although solutions like Carta have facilitated cap table management, reducing costs and increasing accuracy, managing a company’s cap table still takes more time than anyone would like to spend on it. Security tokens provide a definite picture of a company’s cap table with all changes to the cap table automatically occurring upon transfers of the security tokens. Although it is surprising, the same benefits exist with public securities because the massive number of intermediaries handling book entries for the securities, which often are inaccurate or delayed in ways that are problematic for companies and investors.

#6: Security tokens will facilitate better corporate governance. Governance of companies with securities trading in secondary markets (which has commonly been public securities) but is becoming more common in private securities results in low stockholder engagement because stockholders generally hold their stock beneficially (i.e., indirectly). When companies hold votes on important matters, the beneficial holders of stock do not participate, except through the direct record holders of the stock, which is inefficient and results in lower participation by the real “owners” of the stock. In addition, record holders have been known to make mistakes when acting on behalf of beneficial holders of stock. Security tokens allow for an efficient way for investors to hold stock as record holders and be more actively engaged in stockholder decisions. In addition, in the future, security tokens will enable on-chain voting for corporate decisions, which will increase the accuracy of the historically problematic voting process.

#7: Security tokens will enable more efficient and transparent payment of distributions.Payments of distributions can be made with cryptocurrencies, stablecoins being an especially good option. The current process of mailing checks to stockholders when they receive distributions from companies is inefficient. At times, the amount of the check is less than it costs more to mail it. Beyond that issue, it is not logical to incur the cost and time involved with mailing checks when better solutions exist (and current better solutions are often not more cost effective than mailing checks). As confidence in stablecoins grows, the payment of distributions using stablecoins directly to the wallet in which investors hold their security tokens will make for much more efficient and cost-effective distributions. An even more obvious benefit is payments on debt, which can be increased in frequency and automated. In addition, with time, covenants could be required in loan documents for stablecoins on a transparent blockchain to be set aside in a wallet daily to ensure that the company behind the debt has the capital required to make payments on the debt, and creditors could tell immediately if the debtor is behind on its obligations.

#8: Security tokens will make it easier to include utility in securities. Although utility is not a core function or focus of security tokens, there is a benefit to embedding security tokens with utility. The value of security tokens in the hands of some investors who value the utility of the token may be higher than in the hands of others who do not. For example, if a security token gives holders discounts on products, then users of those products will pay more for those tokens than non-users. Of course, this is technically feasible without security tokens, but it will become much more seamless and efficient with them.

In some cases, the benefits set out above are realistic and achievable immediately. In most cases, the benefits are more aspirational and will be achieved with time. Even excluding the many misconceptions regarding the benefits of security tokens, the actual benefits that will be achieved through security tokens are game-changing for both public and private securities.


Marc Boiron is a partner in the Fintech and Blockchain practice group of FisherBroyles. He advises clients on legal matters relating to blockchain technology, cryptocurrencies and security tokens.

Disclaimer: This article does not constitute or substitute for legal advice or reading the rules and regulations we have summarized. In any particular case, you should consult with lawyers with experience on the topic of this article. Depending on your specific situation, answers other than those outlined in this article may be appropriate. Your use of this article alone creates no attorney-client relationship between you and FisherBroyles, LLP. Do not include confidential information in comments to or other feedback on this article, as these are neither confidential nor secure methods of communicating with us.

Published in TheBlock | March 15, 2019, By by Contributor Network

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