Especially for your convenience, we have combined all the information listed above and some additional information in the table.

SEC has created a number of legal acts that regulate various types of securities and their sales. They are called Regulations or Rules. They allow you to organize offers of securities on various conditions, which currently cover a wide range of possible needs and differ in conditions. Here are some of them: Reg A (Reg A+), Reg CF, Reg D (506b, 506c), Reg S. These are the rules that are most suitable for STO and are most likely to be used for this purpose. Unless of course the SEC releases a new one – especially for STO.



Within the framework of this article we did not set ourselves the task to analyze all the details of the legislation, therefore, for ease of perception, we will provide information on several key characteristics for each option: Asset classes, Who can invest, Filing Requirements, Offering size, Solicitation, Trading (resales).



Of course, there are other important parameters, but for a general understanding and primary choice for your STO this is quite enough. Of course, as soon as you decide you need to independently (and better with the help of lawyers) explore all the nuances of the chosen option.



Regulation A (A+)

First we need to clarify that there is only one – Regulation A. Relatively recently, significant changes were made to this Regulation and some began to call it Regulation A +, which caused some confusion because its official name remained Reg A. Thus, Reg A and Reg A + is the same.



At the moment, the conditions for Reg A are as follows. Company organizer can choose one of two options:

a) fees of up to $ 20 million (Tier 1)

b) fees of up to 50 million US dollars (Tier 2)

* For offers up to 20 million, the company can choose both the 1st and 2nd variants at will.



Both tiers have common characteristics and differences.



Common features applicable to both Tiers:

Regulation A is marketable to all investors, regardless of channel.

Limited to U.S. and Canadian companies that have not previously registered with the SEC

Additional requirements apply to Level 2 offers:

limtations on the amount of money that an unaccredited investor can invest

requirements for audited financial statements and current reporting

Issuers in Level 2 offers are not required to register or qualify their offers with government securities regulators.

Asset classes which can be tokenized: equity and debt securities

Who can offer: U.S. and Canadian; no SEC registered companies; no blank check companies; companies that have failed to make previous required filings excluded

Who can invest: up 10

Filing Requirements: the issuer must file an offering statement on Form 1-A with the SEC

Offering size:

Solicitation: Public offering; can be marketed anywhere

Trading (resales):



Regulation Crowdfunding (Reg CF)



CF as you can understand stands for crowdfunding. This is a special act issued to regulate precisely the collections of funds in the framework of crowdfunding campaigns that became popular in 2016. In fact, this act simply consolidated on paper everything that has already been acquired by practice and experience. This regulation also has reduced requirements for companies that collect money and investors. However, the maximum collection limits are lower. Let’s take a closer look at the main features. There are 4 basic rules:

All transactions through a specialized intermediary who is registered with the SEC (this can be a broker-dealer or a special portal)

The maximum fee for one company for 12 months should not exceed $ 1,070,000 (which is not enough for serious STO, but enough for small campaigns)

The maximum amount of investments for 12 months for each investor in various CF campaigns is limited

Disclosure is required for SEC, investors and the intermediary facilitating the offering.

So, as we have said, Reg CF may in theory be suitable for STO, but limiting the maximum amount of investment makes it unsuitable for tokenization of large companies. However, this rule will be very convenient for small companies, as well as tokenized assets – objects of art and real estate.



Asset classes which can be tokenized:

Who can offer:

Who can invest:

Filing Requirements:

Offering size:

Solicitation:

Trading (resales):

Regulation D (506b & 506c)



At the moment, this is one of the most popular rules that are used to conduct STO. As you can see, there are two options for Reg D – Rule 506 (b) and Rule 506 (c). Rule 506 (b) is the original Reg D, Rule 506 (c) is the new one. They have both common characteristics and differences.



Common

This exemption can be used both by SEC-registered and private companies (US and foreign)

There are no restrictions on the maximum offer size.

There are no restrictions on the size of investments from one investor

There are restrictions on the subsequent sale of securities, free circulation is not allowed

Differences

506 (b) does not allow advertising promotion of the offer. Allowed only offers directly to investors. As well as placement using intermediary sites. In 506 (c) there are no such restrictions; any marketing moves are allowed.

Both offers may be available to an unlimited number of accredited investors, but only 506 (b) also allows up to 35 non-accredited investors.

There are other important features and differences, but for a common understanding and choice this is quite enough for your STO. Of course, as soon as you decide you need to independently (and better with the help of lawyers) explore all the nuances of the chosen option.



Asset classes which can be tokenized:

Who can offer:

Who can invest:



Filing Requirements:

Offering size:

Solicitation:

Trading (resales):



Regulation S



Perhaps the most difficult of options. But let’s try to figure it out. This resolution is aimed at offering securities outside the United States and is suitable for both US and foreign companies that want to issue their tokens. That is, even if you do not have a US-registered company, you can register in accordance with this decree and sell your non-US investors tokens but in accordance with US laws.



However, it should be understood that if you are an American company, then most likely your proposal (within the framework of Reg S) will have significant limitations. That is why the simultaneous combination of two rules is recommended. Regulation S is convenient to use as an addition to Reg D (their simultaneous use is allowed), which is very similar with the only difference that Reg S allows you to raise money from foreign investors without the requirement for investor accreditation. That is, you can raise money within STO from US investors in accordance with Reg D, and within the same offering raise money from investors outside the United States according to the rules of Reg S. Do not forget that you should not show the Reg S offer to investors from USA.



Summary:

Asset classes which can be tokenized: equity and debt securities

Who may offer: US and non-US companies

Who may invest: non-US investors and US investors that are currently outside USA

Filing Requirements: not required, but practices must be used according to Reg S

Offering size: not limited

Solicitation:

Trading (resales):



This is only a summary of complex requirements. Not legal advice. Consult an attorney before making any offerings of securities.



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