This article presents a comparative analysis of the application of US and EU securities laws to initial coin offerings (ICOs), or token sales. An extensive token taxonomy framework is proposed to categorize digital assets in order to advance a more precise discussion on the legal classification and regulation of tokens. For the US, a full analysis of the application of the Howey test to different types of tokens gives insight into classification of tokens as a security (“investment contract”) under Section 2(a)(1) of the US Securities Act of 1933 and 3(a)(10) of the Securities Exchange Act of 1934. The analysis shows that most, if not all, so-called utility tokens can be classified as a security in the US. A possible ‘sufficiency-of-decentralization-test’ is also explored, while taking prior case law and the multiple dimensions of decentralization of blockchain projects into account. For EU financial law, the analysis in this paper focuses on the classification of tokens as ‘transferable securities’ under Art. 4(1)(44) of MIFiD II. The analysis shows that, in contrast to the US, pure utility tokens might not be deemed transferable securities under the EU securities regime. Across EU Member States however, large differences exist in terms of the legal classification of most tokens, which result from the freedom provided to EU Member States in transposing the MIFiD II definition of transferable securities into national law. The analysis in this paper provides insight into the two main approaches adhered to by EU Member States in the implementation of this definition, as well as their consequences for the legal classification of tokens. Conclusions are subsequently drawn on possible offering strategies adopted by issuers for future token sales and regulatory developments in the US and EU.
{"title":"Initial Coin Offerings: When Are Tokens Securities in the EU and US?","authors":"T. Maas","doi":"10.2139/ssrn.3337514","DOIUrl":"https://doi.org/10.2139/ssrn.3337514","url":null,"abstract":"This article presents a comparative analysis of the application of US and EU securities laws to initial coin offerings (ICOs), or token sales. An extensive token taxonomy framework is proposed to categorize digital assets in order to advance a more precise discussion on the legal classification and regulation of tokens. For the US, a full analysis of the application of the Howey test to different types of tokens gives insight into classification of tokens as a security (“investment contract”) under Section 2(a)(1) of the US Securities Act of 1933 and 3(a)(10) of the Securities Exchange Act of 1934. The analysis shows that most, if not all, so-called utility tokens can be classified as a security in the US. A possible ‘sufficiency-of-decentralization-test’ is also explored, while taking prior case law and the multiple dimensions of decentralization of blockchain projects into account. \u0000 \u0000For EU financial law, the analysis in this paper focuses on the classification of tokens as ‘transferable securities’ under Art. 4(1)(44) of MIFiD II. The analysis shows that, in contrast to the US, pure utility tokens might not be deemed transferable securities under the EU securities regime. Across EU Member States however, large differences exist in terms of the legal classification of most tokens, which result from the freedom provided to EU Member States in transposing the MIFiD II definition of transferable securities into national law. The analysis in this paper provides insight into the two main approaches adhered to by EU Member States in the implementation of this definition, as well as their consequences for the legal classification of tokens. Conclusions are subsequently drawn on possible offering strategies adopted by issuers for future token sales and regulatory developments in the US and EU.","PeriodicalId":157459,"journal":{"name":"ERPN: Securities Law & Public Offerings (Sub-Topic)","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-02-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130808674","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Commissioner has adopted rules interpreting the Colorado Securities Act which are found at 3 CCR 704-1, available through the Colorado Secretary of State’s website. This article discusses new rules adopted by the Commissioner which became effective July 31, 2018. In a rule-making process that commenced in October 2017 with a “crowdfunding forum” hosted by the Commissioner, the Colorado Division of Securities (the “Division”) has issued significant amendments to its rules including a “Small Offering Exemption” of up to $500,000 under the Colorado Crowdfunding Act. The Division published its proposed rules on March 2, 2018, held a hearing on the proposed rules on May 1, 2018, after receiving written comments from five people, made certain amendments to the proposed rules, and published the final rules after completing the administrative approval process on July 12, 2018. The following sets forth a review of the significant amendments to the Division’s rules, and some questions left unanswered or unaddressed, starting with the significant and potentially beneficial changes to the rules under the Colorado Crowdfunding Act (the “CCFA”).
{"title":"The Colorado Division of Securities Issues New Rules - The Crowdfunding Small Offering Exemption and Other Changes","authors":"Herrick K. Lidstone","doi":"10.2139/ssrn.3244120","DOIUrl":"https://doi.org/10.2139/ssrn.3244120","url":null,"abstract":"The Commissioner has adopted rules interpreting the Colorado Securities Act which are found at 3 CCR 704-1, available through the Colorado Secretary of State’s website. This article discusses new rules adopted by the Commissioner which became effective July 31, 2018. In a rule-making process that commenced in October 2017 with a “crowdfunding forum” hosted by the Commissioner, the Colorado Division of Securities (the “Division”) has issued significant amendments to its rules including a “Small Offering Exemption” of up to $500,000 under the Colorado Crowdfunding Act. The Division published its proposed rules on March 2, 2018, held a hearing on the proposed rules on May 1, 2018, after receiving written comments from five people, made certain amendments to the proposed rules, and published the final rules after completing the administrative approval process on July 12, 2018. The following sets forth a review of the significant amendments to the Division’s rules, and some questions left unanswered or unaddressed, starting with the significant and potentially beneficial changes to the rules under the Colorado Crowdfunding Act (the “CCFA”).","PeriodicalId":157459,"journal":{"name":"ERPN: Securities Law & Public Offerings (Sub-Topic)","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115284103","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The US securities crowdfunding market opened on May 16th, 2016. I provide the first description of the companies and investors participating in this market using data on the full universe of Regulation Crowdfunding issues. I then demonstrate that investment in an issue is closely tied to economic fundamentals after the first week. This result is consistent with unsophisticated investors arriving in the first week and investing indiscriminately and relatively more sophisticated investors arriving thereafter. Based on this evidence, I conclude that the market provides a promising new way for high quality early stage companies to seek financing.
{"title":"Securities Crowdfunding: More than Family, Friends, and Fools?","authors":"Eliot Abrams","doi":"10.2139/ssrn.2902217","DOIUrl":"https://doi.org/10.2139/ssrn.2902217","url":null,"abstract":"The US securities crowdfunding market opened on May 16th, 2016. I provide the first description of the companies and investors participating in this market using data on the full universe of Regulation Crowdfunding issues. I then demonstrate that investment in an issue is closely tied to economic fundamentals after the first week. This result is consistent with unsophisticated investors arriving in the first week and investing indiscriminately and relatively more sophisticated investors arriving thereafter. Based on this evidence, I conclude that the market provides a promising new way for high quality early stage companies to seek financing.","PeriodicalId":157459,"journal":{"name":"ERPN: Securities Law & Public Offerings (Sub-Topic)","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-01-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124027192","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This is the sixth article in the Economists’ hubris paper series, which aims to critically examine the practical applications of academic thinking. The focus of this article is business ethics, with a specific focus on the financial services industry. The main challenges that one faces in determining whether businesses do in fact act unethically, intentionally or otherwise, are that there are no universally agreed parameters for describing ethical behavior; that ethicality seems to be in the eye of the beholder; and that since we are relying solely on external data, and do not have access to the thinking processes that lead to different business decisions, we are unable to state categorically that the management knew ex-post that a given decision would result in an unethical outcome. Given these difficulties, this article suggests that firstly, while most businesses don’t necessarily set out to act unethically, when ethics and profitability collide the latter seems to win most of the time and secondly, that should companies decide to, or inadvertently, act unethically they have learned from the actions of western governments how to manage the ramifications. The increasing influence that businesses now have over those that monitor them, including governments and the media, could potentially lead to corporations becoming less concerned about the ethical ramifications of their actions and consequently result in the concept of business ethics becoming even less viable from a practical perspective.
{"title":"Economists' Hubris – The Case of Business Ethics in Financial Services","authors":"Shahin Shojai","doi":"10.2139/ssrn.2729745","DOIUrl":"https://doi.org/10.2139/ssrn.2729745","url":null,"abstract":"This is the sixth article in the Economists’ hubris paper series, which aims to critically examine the practical applications of academic thinking. The focus of this article is business ethics, with a specific focus on the financial services industry. The main challenges that one faces in determining whether businesses do in fact act unethically, intentionally or otherwise, are that there are no universally agreed parameters for describing ethical behavior; that ethicality seems to be in the eye of the beholder; and that since we are relying solely on external data, and do not have access to the thinking processes that lead to different business decisions, we are unable to state categorically that the management knew ex-post that a given decision would result in an unethical outcome. Given these difficulties, this article suggests that firstly, while most businesses don’t necessarily set out to act unethically, when ethics and profitability collide the latter seems to win most of the time and secondly, that should companies decide to, or inadvertently, act unethically they have learned from the actions of western governments how to manage the ramifications. The increasing influence that businesses now have over those that monitor them, including governments and the media, could potentially lead to corporations becoming less concerned about the ethical ramifications of their actions and consequently result in the concept of business ethics becoming even less viable from a practical perspective.","PeriodicalId":157459,"journal":{"name":"ERPN: Securities Law & Public Offerings (Sub-Topic)","volume":"45 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-02-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116317717","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article argues that the Crowdfund Act’s democratic intent should be protected and nurtured so that crowdfunding’s democratic characteristics have the opportunity to develop and evolve.
本文认为，应保护和培育众筹法案的民主意图，使众筹的民主特征有机会发展和演变。
{"title":"The Crowdfund Act's Strange Bedfellows: Democracy and Start-Up Company Investing","authors":"Jack Wroldsen","doi":"10.17161/1808.20252","DOIUrl":"https://doi.org/10.17161/1808.20252","url":null,"abstract":"This article argues that the Crowdfund Act’s democratic intent should be protected and nurtured so that crowdfunding’s democratic characteristics have the opportunity to develop and evolve.","PeriodicalId":157459,"journal":{"name":"ERPN: Securities Law & Public Offerings (Sub-Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-01-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125833689","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
As China’s economy continues to grow and mature, the market for private placements will also grow. Economic prosperity will result in a greater number of investors seeking investment opportunities. Prosperity will also result in the greater demand for goods and services, fueling the creation of more businesses that require capital. As China confronts this market reality, it must decide its legal response to the private-placement market. China is still in the early stages of deciding what sort of legal regime should govern its private-placement market. As it stands now, private placements in China are effectively governed by one provision in the Securities Law of the People’s Republic of China. This article explores what approach China should take in regulating its private placements. In the end, this article can provide no ultimate truths as to whether China should approach securities regulations with a heavy hand or a light one. The author recommends erring on the side of less regulation, rather than more. Whether that path is the correct one for China requires more reflection and consideration by Chinese policy-makers. For any approach Chinese policy-makers adopt to regulate private placements, they should adhere to certain principles: First, private-placement laws and interpretations must be based on a careful understanding and balancing of the costs and benefits of the proposed regulation. Second, private-placement laws must be drafted clearly and made easily accessible to the public to reduce compliance costs. Third, interpretations of laws must be intellectually legitimate – they must logically follow from the language and purpose of the law.
{"title":"Regulating Private Placements in China: A Principled Approach","authors":"Christopher John Gulinello","doi":"10.2139/SSRN.2228356","DOIUrl":"https://doi.org/10.2139/SSRN.2228356","url":null,"abstract":"As China’s economy continues to grow and mature, the market for private placements will also grow. Economic prosperity will result in a greater number of investors seeking investment opportunities. Prosperity will also result in the greater demand for goods and services, fueling the creation of more businesses that require capital. As China confronts this market reality, it must decide its legal response to the private-placement market. China is still in the early stages of deciding what sort of legal regime should govern its private-placement market. As it stands now, private placements in China are effectively governed by one provision in the Securities Law of the People’s Republic of China. This article explores what approach China should take in regulating its private placements. In the end, this article can provide no ultimate truths as to whether China should approach securities regulations with a heavy hand or a light one. The author recommends erring on the side of less regulation, rather than more. Whether that path is the correct one for China requires more reflection and consideration by Chinese policy-makers. For any approach Chinese policy-makers adopt to regulate private placements, they should adhere to certain principles: First, private-placement laws and interpretations must be based on a careful understanding and balancing of the costs and benefits of the proposed regulation. Second, private-placement laws must be drafted clearly and made easily accessible to the public to reduce compliance costs. Third, interpretations of laws must be intellectually legitimate – they must logically follow from the language and purpose of the law.","PeriodicalId":157459,"journal":{"name":"ERPN: Securities Law & Public Offerings (Sub-Topic)","volume":"50 7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126352679","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2009-04-29DOI: 10.1111/j.1475-679X.2009.00320.x
Rachel M. Hayes
(GWZ) examine a potential unintended consequence of the SEC’s use of bright-line thresholds for compliance with reporting regulations. In particular, the authors consider whether the SEC’s postponement of compliance with Section 404 of the Sarbanes-Oxley Act (SOX) for “non-accelerated filers” (firms with a public float of less than $75 million) provided firms with an incentive to stay small. The authors find that non-accelerated filers are more likely to remain below the $75 million threshold than are accelerated filers. They also investigate a variety of actions that non-accelerated filers might take in order to keep their public float below $75 million.
{"title":"Discussion of 'Unintended Consequences of Granting Small Firms Exemptions from Securities Regulation: Evidence from the Sarbanes-Oxley Act'","authors":"Rachel M. Hayes","doi":"10.1111/j.1475-679X.2009.00320.x","DOIUrl":"https://doi.org/10.1111/j.1475-679X.2009.00320.x","url":null,"abstract":"(GWZ) examine a potential unintended consequence of the SEC’s use of bright-line thresholds for compliance with reporting regulations. In particular, the authors consider whether the SEC’s postponement of compliance with Section 404 of the Sarbanes-Oxley Act (SOX) for “non-accelerated filers” (firms with a public float of less than $75 million) provided firms with an incentive to stay small. The authors find that non-accelerated filers are more likely to remain below the $75 million threshold than are accelerated filers. They also investigate a variety of actions that non-accelerated filers might take in order to keep their public float below $75 million.","PeriodicalId":157459,"journal":{"name":"ERPN: Securities Law & Public Offerings (Sub-Topic)","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-04-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130336710","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
How does the law address topics such as the sale and trade of securities and the regulation of stock exchanges and investment firms? Given the growing importance of capital markets, securities law is highly relevant, but unfortunately also quite complicated. This complexity is also reflected in its literature; reading about securities law, one may relate to Brian Cheffins' chess analogy: Since everyone is expected to be familiar with the first fifty moves, authors often just write about the end game. Therefore, there is a need to explain the first fifty moves, i.e. the very foundations of securities law. Part I of this paper describes when and how securities markets evolved. Part II discusses the relationship between market and bank financing. Parts III and IV outline which types of securities and stock exchanges exist. Part V addresses how (and to what extent) securities law has been harmonised, in particular in the European Union. Part VI concludes. Most parts of this paper are descriptive. However, it also refutes the frequent claim that only in Common Law countries securities markets are important and investors well protected. The origins of securities markets are partly continental European (namely Italian and Dutch), and there are a number of common trends which concern most countries of the world. Moreover, the foundations of securities law are relatively similar across countries, as will be demonstrated in this paper.
{"title":"The Foundations of Securities Law","authors":"M. Siems","doi":"10.2139/SSRN.1089747","DOIUrl":"https://doi.org/10.2139/SSRN.1089747","url":null,"abstract":"How does the law address topics such as the sale and trade of securities and the regulation of stock exchanges and investment firms? Given the growing importance of capital markets, securities law is highly relevant, but unfortunately also quite complicated. This complexity is also reflected in its literature; reading about securities law, one may relate to Brian Cheffins' chess analogy: Since everyone is expected to be familiar with the first fifty moves, authors often just write about the end game. Therefore, there is a need to explain the first fifty moves, i.e. the very foundations of securities law. Part I of this paper describes when and how securities markets evolved. Part II discusses the relationship between market and bank financing. Parts III and IV outline which types of securities and stock exchanges exist. Part V addresses how (and to what extent) securities law has been harmonised, in particular in the European Union. Part VI concludes. Most parts of this paper are descriptive. However, it also refutes the frequent claim that only in Common Law countries securities markets are important and investors well protected. The origins of securities markets are partly continental European (namely Italian and Dutch), and there are a number of common trends which concern most countries of the world. Moreover, the foundations of securities law are relatively similar across countries, as will be demonstrated in this paper.","PeriodicalId":157459,"journal":{"name":"ERPN: Securities Law & Public Offerings (Sub-Topic)","volume":"88 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-09-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126451506","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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