Step 18: Determining the Registration Status of the Offering

Mandatory

Determining whether your Security Token Offering (STO) requires full registration with a regulatory authority or qualifies for an exemption is essential to ensuring compliance, investor eligibility, and marketability. This decision dictates who can invest, how the offering can be promoted, and the regulatory obligations the issuer must fulfill. If the offering is registered, it must be formally approved by a recognized financial regulator before tokens are sold. If it qualifies for an exemption, issuers must adhere to specific conditions, such as investor type restrictions, marketing limitations, and filing requirements. Clearly recording this decision ensures legal transparency and regulatory alignment throughout the token’s lifecycle.

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Offering Registration Status

Registered Offering

• The STO is fully approved by a financial regulatory authority, such as the SEC (U.S.), FCA (UK), FINMA (Switzerland), or an European Authority (FMA in France, BaFin in Germany).

• Requires the submission and approval of a prospectus and supplementary disclosure documentation.

• Typically allows participation from both retail and professional investors.

• Enables public marketing and advertising, making it accessible to a broader audience.

• Involves ongoing reporting obligations, such as financial disclosures, periodic filings, and corporate governance updates.

Exempt Offering

• The STO qualifies for an exemption under frameworks such as Regulation D (U.S.), Small Offers Exemption (EU/UK), or Qualified Investor Exemption (Switzerland).

• Does not require a full prospectus but must comply with exemption-specific regulations, such as investor eligibility criteria, fundraising limits, and restricted solicitation.

• Often limited to accredited investors, institutions, or professional clients.

• May impose resale and secondary market restrictions, affecting token liquidity.

The offering must be either registered or comply with exemptions in each country in which tokens are being offered.

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Why This Step is Important

• Ensures Legal Compliance

  • Establishes whether the offering is fully registered or operating under an exemption, ensuring adherence to applicable regulations.

• Defines Investor Participation

  • Determines whether the offering can be open to retail investors or restricted to qualified investors.

• Affects Marketing & Distribution Strategy

  • Fully registered offerings allow general advertising and public solicitation, while exempt offerings may require private investor outreach.

• Impacts Liquidity & Trading Options

  • Security tokens from registered offerings may have fewer trading restrictions, making them more attractive for secondary markets.

  • Exempt offerings may impose holding periods or transfer restrictions before tokens can be traded.

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Actions

1. Determine Registration Status

   1. If the STO requires registration, prepare and submit a prospectus to the appropriate regulatory authority.

   2. If the STO qualifies for an exemption, identify the specific exemption type and follow its regulatory requirements.

2. Select the Appropriate Regulatory Body

   1. Choose the financial regulator governing the STO’s jurisdiction, ensuring full compliance with its rules.

3. Record the Decision as Metadata

   1. Store the registration status and regulatory body as Offering_Registration_Status and Regulatory_Body in the smart contract for transparency and tracking.

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