U.S. SEC proposes amendments to securities issue exemption rules involving token issuance

The United States Securities and Exchange Commission (SEC) has voted to propose a set of rule changes to streamline and refine the "patchwork" rules used to waive securities issuance.


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The proposed rule changes aim to improve the existing "complex and chaotic" framework and make it easier for companies to launch products that still protect investors.

In the United States, securities offerings, including initial coin offerings (ICOs), must be registered with the SEC or be eligible for an exemption. Most entrepreneurs and start-ups (such as Telegram) raise funds through exempted issuance frameworks.

Propose limits for uncertified investors

Many exemptions in the cryptocurrency field fall under Regulation 504 of the Securities Act. Under the proposed rule change, under this rule, the maximum amount that can be raised from uncertified investors is increased from $ 5 million to $ 10 million in 12 months.

Under the proposed rules, the SEC claims that it "reflects a comprehensive review of a patchwork system built over decades that aims to address deficiencies and complexities in the exempt issuance framework that could hinder issuers from gaining Capital and investors get investment opportunities. "

The SEC exemplifies that the current framework has 10 exemptions or "safe harbors", each with very different requirements, which "can cause confusion and difficulty for issuers." The new regulations propose four non-exclusive “safe harbors”.

The proposed amendments will also:

  • Implement a widely applicable rule to address an issuer's ability to move from one exemption to another, and ultimately to a registered issue
  • Increase issuance limits and modify certain personal investment limits.
  • Develop clear, consistent rules to guide communication between investors and issuers, including allowing issuers to “test the water” with general stakeholder materials before determining what kind of securities they will exempt from selling.
  • Harmonize certain disclosure and eligibility requirements and disqualifications for bad actors to reduce the difference between exemptions.

Proposal reflects public opinion

These recommendations are based on information publicly submitted by the SEC June 2019 Concept Release Recommendation. From today, public comments on the amendment will be open for 60 days.

The U.S. Securities and Exchange Commission (SEC) has taken proactive action on the cryptocurrency project, which it believes violates existing regulations on unregistered securities, in particular Telegram, which completed the Gram token sale on a $ 1.7 billion scale.

SEC Chairman Jay Clayton said:

"The complexity of the current framework confuses many people involved in this process, especially for small businesses that spend their limited resources on understanding our overly complex rules. These proposals are aimed at creating a more reasonable framework for businesses Better access to capital while retaining and strengthening important investor protection. "

SEC also hopes to expand definition of "qualified investor"

The SEC also hopes to expand the definition of "qualified investor", which currently refers to an entity with a personal net worth of $ 1 million or a controlling asset of more than $ 5 million. New rules introduced last December will extend the definition to those with expertise, experience or qualifications.

The existing rules are designed to protect everyday investors from predatory products, but they are controversial because they prevent ordinary people from using wealth to form opportunities. The current Regulation D exemption is based solely or primarily solely on guarantees to "accredited investors".

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