# Define Risk Disclosures and Legal Liability

This step requires you to **formally define, disclose, and accept the legal, financial, and operational risks associated with the tokenization project**. These risks must be communicated to all relevant parties (investors, service providers, platforms) through a unified, written statement.

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## Objective

**To ensure the issuer:**

* Acknowledges all known risks related to the project and legal structure.
* Discloses those risks clearly and transparently to all parties.
* Limits liability through the assumption of risk and waiver provisions.
* Complies with regulatory standards for investor disclosures.

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## Key Risk Categories to Include

1. **Regulatory Risk** – Uncertain or changing classification of tokenized assets
2. **Market Risk** – Price volatility, illiquidity, or token devaluation
3. **Asset Risk** – Underperformance, legal claims, encumbrances
4. **Technology Risk** – Smart contract bugs, exploits, system failure
5. **Legal Structuring Risk** – Jurisdictional enforcement or SPV breakdown
6. **Tax Risk** – Unclear or evolving investor tax obligations
7. **Custody Risk** – Asset loss, mismanagement, or third-party failure
8. **Force Majeure Risk** – Political, environmental, or economic disruption
9. **Liquidity Risk** – Inability to resell or trade tokens
10. **Token Performance Risk** – Yields or returns may not materialize

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## Required Documents

The issuer must upload a signed **Risk Disclosure and Liability Statement**, which includes:

* A complete list and description of the risks outlined above
* A declaration that the issuer assumes responsibility for risks within its control
* Legal limitation of liability for market, technological, and external factors
* Clauses indemnifying platform operators and investors from misrepresentation
* A governing law provision and the date of acceptance

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## Purpose of This Step

* **Investor Protection** – Ensures token holders understand the full risk exposure.
* **Issuer Protection** – Limits liability for events outside the issuer's control.
* **Regulatory Compliance** – Satisfies disclosure requirements under securities laws.
* **Legal Integrity** – Establishes enforceable terms for dispute resolution.

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{% hint style="success" %}
**Note:** If desired, Stobox can provide a customizable legal template for this disclosure, adapted by jurisdiction or token model.
{% endhint %}

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