-- DiamondLake (OTC:DLMI) today released a comprehensive guide on how companies can use Regulation S to conduct compliant Token Offerings or Initial Coin Offerings (ICOs). With growing interest in blockchain and tokenization, Regulation S offers a powerful exemption from SEC registration for offers made outside the United States to non-U.S. persons.
R. Kaufman - VP Compliance - DiamondLake
What Is Regulation S?
Regulation S provides an exclusion from the registration requirements of the Securities Act of 1933 for offerings made outside the U.S. to non-U.S. persons. This exemption allows issuers to bypass the traditional registration process when conducting offers or sales of securities overseas.
Kaufman explained, “Regulation S offers a valuable legal framework for global companies looking to tokenize their assets or conduct ICOs without the complexities of U.S. securities law.”
Key Conditions for Regulation S Compliance
To qualify for Regulation S, certain conditions must be met:
- Offshore Transactions: Offers and sales must take place outside of the United States.
- No Directed Selling Efforts in the U.S.: Issuers and distributors must ensure that no efforts are made to target U.S. persons.
Companies can take multiple steps to comply, such as restricting access to offering documents from U.S. IP addresses, ensuring offshore transactions are genuinely executed outside U.S. jurisdictions, and using distinct offering documents that include legends to prevent the sale of securities back to U.S. investors.
How to Ensure Your Regulation S Offering Stays Compliant
DiamondLake’s guide outlines practical steps companies should take, such as:
- Blocking U.S. Investors: Using geolocation technology to prevent U.S. users from accessing offering materials.
- Distinct Offering Documents: Including legal disclaimers that the offering is made in reliance on Regulation S and cannot be resold to U.S. persons.
- Preventing Flowback: Ensuring that tokens sold outside the U.S. are locked for at least one year to avoid the risk of being resold back into the U.S. market.
“These precautions are critical to maintaining Regulation S compliance,” said Kaufman. “Given the pseudonymous nature of digital assets, taking extra steps to lock tokens for a year and prevent ‘flowback’ is vital.”
Why Regulation S Is Essential for Global Token Offerings
With the tokenized asset market booming, Regulation S offers a streamlined path for U.S. and foreign issuers to bring their offerings to international markets. By utilizing this safe harbor, companies can raise capital globally without navigating the burdens of full U.S. securities registration.
About DiamondLake
DiamondLake (OTC:DLMI) is at the forefront of the tokenized economy, offering expert guidance to companies looking to tokenize their assets or raise capital via compliant token offerings. With extensive knowledge of both U.S. and international regulatory frameworks, DiamondLake serves as a Sponsor Advisor to help issuers navigate the complexities of Regulation S and other securities laws.
For more information, contact [email protected] or visit www.DiamondLake.com
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