# STO Classifications

The issuer must **determine whether the Security Token Offering (STO) will be conducted as a Registered Offering or under a Regulatory Exemption**. This decision **shapes the entire compliance strategy — who can invest, how the token can be promoted, what disclosures are required, and how tokens may be traded post-sale**.

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## Objective <a href="#objective" id="objective"></a>

Select the STO framework that ensures regulatory compliance, aligns with your investor base, and supports your marketing and liquidity goals.

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## STO Classification: Registered vs. Exempt <a href="#sto-classification-registered-vs.-exempt" id="sto-classification-registered-vs.-exempt"></a>

### Registered Security Token Offering <a href="#registered-security-token-offering" id="registered-security-token-offering"></a>

A Registered Offering is reviewed and approved by a national financial regulator (e.g., SEC, FCA, BaFin, FINMA).

**Key characteristics:**

* Requires
* Requires full submission of a prospectus or offering memorandum.
* Allows participation by both retail and institutional investors.
* Enables public marketing and advertising.
* Requires ongoing reporting and financial disclosures.
* Suitable for larger, mass-market, or institutional offerings.

**Examples of Registered Offerings:**

* SEC Regulation A+ or S-1 (USA)
* FCA-authorized prospectuses (UK)
* MiFID II / EU Prospectus Regulation
* FINMA-registered public offerings (Switzerland)

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### Exempt Security Token Offering <a href="#exempt-security-token-offering" id="exempt-security-token-offering"></a>

An Exempt Offering qualifies under specific legal exemptions and does not require full registration, but imposes restrictions.

**Key characteristics:**

* Restricted to accredited, institutional, or qualified investors.
* No public solicitation or mass marketing is allowed.
* May require investor verification and self-certification.
* Subject to resale restrictions or lock-up periods (e.g., 12 months under Rule 144 in the US).
* Lower cost and faster launch time, ideal for private placements.

**Examples of Exempt Offerings:**

* Regulation D, Rule 506(c) (USA) - Accredited investors only
* Regulation S (USA) - Offshore investors only
* Small Offers Exemption (EU/UK)
* Qualified Investor Exemption (Switzerland)

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### Key Differences Between Registered and Exempt STOs <a href="#key-differences-between-registered-and-exempt-stos" id="key-differences-between-registered-and-exempt-stos"></a>

| Aspect                   | Registered Offering                | Exempt Offering                    |
| ------------------------ | ---------------------------------- | ---------------------------------- |
| Regulatory Approval      | Required (full review)             | Not required (relies on exemption) |
| Investor Eligibility     | Open to all investors              | Limited to accredited or qualified |
| Marketing & Promotion    | Public advertising permitted       | Private placement only             |
| Disclosures & Prospectus | Full prospectus & filings required | No prospectus, limited disclosure  |
| Secondary Market Access  | More flexible                      | May be restricted                  |
| Time to Launch           | Longer (3–6 months)                | Shorter (1–3 months)               |

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### How to Choose the Right Framework <a href="#how-to-choose-the-right-framework" id="how-to-choose-the-right-framework"></a>

* Where are your investors located?
  * If you’re offering to retail investors in the US or EU, a registered offering may be required.
* What kind of investors are you targeting?
  * If you’re raising from institutions or accredited investors only, an exemption may be ideal.
* Do you want to publicly promote the STO?
  * Only registered offerings allow general solicitation.
* Do you want flexibility in secondary trading?
  * Registered offerings often offer smoother access to regulated exchanges.
* Do you have the legal resources to manage a full registration process?
  * If not, exemptions may be faster and more cost-effective.

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### Issuer Action Items <a href="#issuer-action-items" id="issuer-action-items"></a>

1. Determine Offering Type: Registered or Exempt.
2. Select Jurisdiction & Regulator: (e.g., SEC, FCA, FINMA, BaFin).
3. Document the Framework: In your Token Issuance Specification (TIS), Terms of Use, and Whitepaper.
4. Comply with All Requirements: Investor verification, marketing rules, and filing obligations.

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### Conclusion: Ensuring Compliance <a href="#conclusion-ensuring-compliance" id="conclusion-ensuring-compliance"></a>

**Selecting the correct STO framework ensures:**

* Legal compliance and avoidance of enforcement action
* Clear rules for investor participation
* A suitable marketing and distribution plan
* Proper planning for liquidity and secondary trading
* Strong regulatory positioning and investor confidence

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### Stobox Legal Support <a href="#stobox-legal-support" id="stobox-legal-support"></a>

Stobox and its legal partners provide full support with STO framework selection, including exemption analysis, jurisdiction strategy, and regulatory filings.

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