SEC issues draft rules for initial coin offerings
Proposed rules on initial coin offerings (ICOs) have been released by the Securities and Exchange Commission in a bid to regulate the fund-raising innovation and protect investors.
Based on a draft provided the media on Thursday, the corporate regulator any entity wanting to conduct an ICO should first file an initial assessment request detailing the offering, after which a determination will be made whether the token to be issued is a security or not.
“If [the Commission]finds that the tokens are indeed security tokens, and unless the ICO falls under the exemptions from registration provided under the rules or conducted exclusively through crowdfunding portals under the proposed rules for crowdfunding, the company must register the security tokens (registration proper) before the start of the pre-sale,” the SEC said.
Start-ups planning to conduct security token ICOs will have to register as a corporation while issuers whose principal offices are abroad will have to set up a branch in the Philippines.
Ocular inspections and system walkthroughs will be part of the ICO registration process.
Exemptions will be made for offerings to fewer than 20 persons during a one-year period and sales to banks, registered investment houses, insurance firms, government-owned pension/retirement funds, among others.
The proposed rules also cover advertising for the offering, reportorial requirements and provisions for the return of investment funds if the ICO is not completed.
The SEC noted that ICOs would help business raise capital and offer alternative investment opportunities for the public but added that its mandate includes that of promulgating rules for the registration and licensing of “innovative and other trading markets…”.
“[I]t is essential to ensure that initial coin offering shall operate in a manner that is consistent with investor protection, and in the interest of the public, market integrity and transparency,” it said.
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