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18 Regulatory Insights for ICOs

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In late 2017, we hosted a webinar for financial legislation experts to answer questions about ICOs and their legal status in various jurisdictions. These slides are a preview of 18 insights and answers to the key questions every company
considering an ICO needs to ask.

Veröffentlicht in: Technologie
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18 Regulatory Insights for ICOs

  1. 1. 1 19 Must-Know Regulatory Insights for ICOs
  2. 2. 2 Agenda United States Regulatory Analysis China Regulatory Analysis Canada Regulatory Analysis Other Jurisdictions: What are Regulators around the World doing about ICOs?
  3. 3. 3 Speakers Angela Chartrand Founder Sara Hody Associate Marco Santori Partner Neal Reiter Director of Product
  4. 4. 4 Introduction In late 2017, we hosted a webinar for financial legislation experts to answer questions about ICOs and their legal status in various jurisdictions. These slides are a preview of 18 insights and answers to the key questions every company considering an ICO needs to ask. Click Here to Download All 18 Insights
  5. 5. 5 United States Regulatory Analysis United States Regulatory Analysis
  6. 6. 6 What is a Security? The Howey Test was created by The Supreme Court for determining whether certain transactions qualify as investment contracts – and thus subject to security requirements. Securities include notes, stocks, bonds, debentures, and any other instrument that can be characterized as an investment contract. Under the Howey Test, a transaction is an investment if: q It is an investment of money q There is an expectation of profits from the investment q The investment of money is in a common enterprise q Any profits comes from the efforts of a promoter of third party If an investors own actions largely dictate whether an investment will be profitable, then that investment is probably not a security Investment SUBSTANCE Investment FORM Courts will look at the economic realities (substance) of an investment scheme Getting Familiar with The Howey Test
  7. 7. 7 Requirements If You Are A Security In general, all securities offered in the U.S. must be registered with the SEC (there are some exceptions). The registration process involves the disclosure of certain information, including: • Description of the company’s properties and business purpose • A description of the security being offered • Information about the company’s management • Financial statements about the company, certified by independent accountants
  8. 8. 8 Regulatory Analysis 1. Is it worth launching a ICO if you’re a security? Or should you consider other funding mechanisms? 2. If you are possibly a security, do you block the U.S.? 3. If you are security and you don't block the US: What could happen? For example, you're in Switzerland and you're a security accepting U.S. customers. 4. If you’re not a security, which U.S Government Agencies have jurisdiction? Who should you be most concerned about? 5. If you're not a security, what kind of compliance do you have to do? 6. Who's scarier: the SEC or Class Action Lawyers?
  9. 9. 9 Regulatory Analysis 1. Is it worth launching a ICO if you’re a security? Or should you consider other funding mechanisms? • Some business models may not be a good fit for tokens, so consider the function of the token itself (security or utility) to answer this question • Reg D or Reg A+, which allow smaller companies to raise capital without registering with the SEC, are also options • Speak to an experienced lawyer as early as possible, as they can advise on the market demand for the token in the given regulatory constraints
  10. 10. 10 Regulatory Analysis Whether the ICO is targeted at the U.S. or not, it is almost certain that the resulting activity will enter U.S. jurisdiction. Blocking the U.S. is unlikely to exempt most ICOs from regulatory obligations. The US is also a very large market, so blocking the U.S. may make it challenging for any given ICO to gain enough contributors. 2.If you are possibly a security, do you block the U.S.? Marco Santori Partner Cooley
  11. 11. 11 Regulatory Analysis 3. If you are security and you don't block the US: What could happen? For example, you're in Switzerland and you're a security accepting U.S. customers. The possible consequences of violating U.S. law are: • Losing the value of the investment • Being financially liable as an individual • A jail sentence These are all possibilities, but significant monetary penalties are more probable. Marco Santori Partner Cooley
  12. 12. 12 f Click Here To download the rest of the insights on ICO legislation in China, Canada, the UK, and across the world!

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