Requirements for Exemption Under Regulation D
U.S law generally requires securities (including virtual tokens that qualify as securities) to be registered with the government before they can be offered or sold. Regulation D provides two major exemptions from registration for some offerings.
Under Rule 504 of Regulation D, a company can offer and sell its virtual tokens to an unlimited number of investors, but the offering is limited to only $5 million during any 12-month period.
In comparison, under Rule 506, a company can offer and sell an unlimited amount of its virtual tokens. Rule 506(b) permits sales to up to 35 purchasers who do not qualify as accredited investors, but prohibits general solicitation. Rule 506(c) requires that all purchasers qualify as accredited investors, but permits general solicitation.
Regardless of which rule is used to exempt an offer of virtual tokens under Regulation D, the tokens will be subject to transfer restrictions. In general, those restrictions prohibit the tokens from being resold or transferred for at least one year after purchase.
Authoritative Guidance for Token Sales Under Regulation D
Dilendorf & Khurdayan provides comprehensive legal guidance and practical solutions throughout a Regulation D offering of virtual tokens.
Our services include:
- Carefully reviewing our clients’ circumstances and advising them on the optimal registration exemption for their token sales, whether under Regulation D or not
- Drafting detailed private-placement memoranda that clearly describe the virtual tokens and contain all necessary disclosures and disclaimers
- Advising clients on verification of the identifying information provided by prospective purchasers and determining purchasers’ eligibility to participate in a token sale
- Preparing and filing Form D to notify the SEC of the offering under Regulation D
- Structuring a simultaneous offering outside of the United States under Regulation S, if necessary
Contact Us to Learn More About Our Regulation D Services for Token Sales
Send us an email or call 212.457.9797 to schedule a consultation at our Manhattan office.