DIGITAL SECURITIES OFFERINGS

Digital Securities Offerings (“DSO”) or Security Token Offerings (“STO”)

STO stands for "security token offering," and refers to the creation and sale of digital securities. All tokens that are offered or sold on BANQ® are classified as securities. All STOs offered on BANQ® are securities and will be referred to as a "DSO "or Digital Securities Offering.

STO or ICO

What is a blockchain?

A blockchain is an electronic distributed ledger or list of entries – much like a stock ledger – that is maintained by various participants in a network of computers. Blockchains use cryptography to process and verify transactions on the ledger, providing comfort to users and potential users of the blockchain that entries are secure. Some examples of blockchain are the Bitcoin and Ethereum blockchains, which are used to create and track transactions in bitcoin and ether, respectively.

Digital Securities

Digital Securities are units of ownership in an asset that is managed by the blockchain. By utilizing a smart contract, a type of self-executing contract operated on the blockchain, issuers can offer an array of financial rights to an investor including equity, dividends, profit share rights, voting rights, buy-back rights, etc.

In the past, securities were either certificated in the form of a paper certificate or held in digital book entry on behalf of the shareholder. One’s ownership of a security was written down and kept on a ledger that is maintained by a central authority (either transfer agent, custodian or the issuer). With digital securities, this ledger is maintained by the blockchain, which is decentralized and fully transparent.

Digitalizing an asset and using a smart contract enables the shares’ owners to sell shares through compliant exchanges on-demand, creating liquidity in assets that have traditionally been illiquid. Asset digitalization isn’t changing the financial security itself, but it alters the way ownership is managed and can automate post-investment actions for the benefit of both investors and issuers.

Investors and DSOs

Digital Securities Offerings (“DSOs”) offered on BANQ are issuances of digital assets that either been (i) registered for sale / resale pursuant to an effective registration statement filed with the SEC; (ii) qualified for sale / resale pursuant a qualified offering statement filed with the SEC; or (iii) which were issued pursuant to a valid exemption from registration (i.e. Regulation D, Rule 506. Fractional ownership and the prospective ability to trade these assets 24/7 are additional advantages of digital assets, as they have the potential to add more opportunities to buy and sell. These characteristics can potentially add liquidity to the market as more people will have access to shares and investors could be able to buy or sell at any time. This should help open the market to smaller investors who wouldn’t traditionally have access to similar types of investments.

Issuers and DSOs

One of the main factors of using a DSO vs. an Initial Public Offering (“IPO”) to raise funds is the cost. IPOs typically require a lot of resources and, on many levels, are not suitable for smaller companies. With IPOs, companies usually pay high brokerage and investment banking fees to get access to a deeper investor base. While DSO issuers still need to pay lawyers and advisors, they offer more direct access to the investment market and, therefore, typically won’t require larger fees to investment banks or brokerages. Additionally, smart contracts reduce the reliance on lawyers, while the blockchain reduces the need for paperwork. Asset digitalization has the potential to make the public offering process not only cheaper, but also faster and more streamlined.

Due to a digital asset’s programmable nature, issuers can implement different features to make them more robust. Smart contracts can help deal with recurring payments like automatic dividends or coupon payments. Issuers can include background or investor verification checks, so digital assets can only be sent to known persons. The security and transparency of the blockchain and the ability to audit the system anytime increases trust and credibility, ensuring raises are compliant and fair. Eventually, security tokens could be tradable 24/7 with near-instant settlement, revolutionizing the industry as we know it today.

BANQ® DIGITAL SECURITY OFFERINGS EXEMPTIONS

The BANQ® Offerings are conducted under a registration or exemption. Below you will find the various types of offerings that may be posted on BANQ®.

Reg A+

The 2012 Jumpstart Our Business Startups (JOBS) Act established provisions that allow early‐stage companies to offer and sell securities to the public through a more streamlined and less burdensome process. Dubbed “Reg A+”, Title VI of the JOBS Act, took effect in June of 2015. Reg A+ offerings are sometimes referred to as ‘mini‐IPOs’ and follow a process similar to a traditional IPO. The securities issued in a Reg A+ offering are exempt securities under the Securities Act, but the offering must be qualified in advance by the SEC before any sales can commence.

Regulation D

Another new exemption from registration created following the JOBS Act was the adoption by the SEC of a new Rule 506(c). Similar to original Rule 506, which is now Rule 506(b), Rule 506(c) allows a company to sell an unlimited amount of securities to accredited investors. Under the new rule, however, companies may engage in general solicitation and advertising of its offerings, provided it undertakes to objectively verify the status of every investor in the offering as an accredited investor. Securities issued pursuant to Rule 506(c) are restricted securities under the Securities Act of 1933 and, as a result, cannot be sold or transferred in the absence of a registration statement being filed with the SEC or the availability of an exemption from such requirement, such as Rule 144.

Regulation S

Regulation S provides an exemption from the registration requirements of the Securities Act for offers and sales of securities that occur outside of the United States. Regulation S permits a U.S. company to issue securities to non-U.S. Persons in transactions outside of the U.S. without SEC registration. In order to comply with Regulation S the Company must establish that the investor is a non-U.S. person (as defined in the Rule) and that the transaction itself was consummated outside of the U.S.

Investing in digital securities are a highly speculative investment and could result in the loss of your entire investment.

A purchase tokens is significantly speculative and involves significant risks. Tokens should not be purchased by any person who cannot afford the loss of his or her entire purchase price.

Investing in Tokens are a highly speculative investment and could result in the loss of your entire investment

Digital securities have the potential for significant volatility and price movement.

The value of cryptocurrencies may be subject to momentum pricing due to speculation regarding future appreciation in value, leading to greater volatility, which could adversely affect an investment in the Securities.

The value of cryptocurrencies may be subject to momentum pricing due to speculation regarding future appreciation in value, leading to greater volatility, which could adversely affect an investment in the Securities.

Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for anticipated future appreciation in value. The market price for cryptocurrencies and other digital assets, is determined using data from various cryptocurrency exchanges, over-the-counter markets, cryptocurrency futures markets, derivative platforms and other cryptocurrency investment vehicles. Momentum pricing may have resulted, and may continue to result, in speculation regarding future appreciation in the value of cryptocurrencies and other digital assets, inflating and making their market prices more volatile. As a result, they may be more likely to fluctuate in value due to changing investor confidence in future appreciation (or depreciation) in their market prices, which could adversely affect the value of your investment in digital securities. It is important to note that most tokens are illiquid and no market exists for trading and may never develop.

Read All Investment Materials

Before making any investment, carefully read all the offering materials on BANQ including the risk factors. Make sure a the digital security offering is suitable for your investment objectives.

STO or ICO

SEC Warnings

The SEC has taken a cautionary approach towards cryptocurrencies and digital assets in general, and more specifically ICOs. In September 2017, the SEC created a new division known as the “Cyber Unit” to address, among other things, violations involving DLT and ICOs. In February 2018, both the SEC and CFTC further reiterated its concerns regarding cryptocurrencies in a written testimony to the Senate Banking, Housing and Urban Affairs Committee. On March 7, 2018, the SEC released a Statement on Potentially Unlawful Online Platforms for Trading Digital Assets, and reiterated that, if a platform “offers trading of digital assets that are securities” and “operates as an ‘exchange,’ as defined by the federal securities laws,” the platform must register with the SEC as a national securities exchange or be exempt from registration. The SEC’s statement serves as a notice to operators of any platforms, including secondary market trading platforms, that the SEC is actively monitoring for potentially fraudulent or manipulative behavior in the market for security tokens, as the SEC has cautioned recently for ICOs.

BANQ® DIGITAL SECURITY OFFERINGS EXEMPTIONS

The BANQ® Offerings are conducted under a registration or exemption. Below you will find the various types of offerings that may be posted on BANQ®.

Reg A+

The 2012 Jumpstart Our Business Startups (JOBS) Act established provisions that allow early‐stage companies to offer and sell securities to the public through a more streamlined and less burdensome process. Dubbed “Reg” A+, Title VI of the JOBS Act, took effect in June of 2015. Reg A+ offerings are sometimes referred to as ‘mini‐IPOs’ and follow a process similar to a traditional IPO. The securities issued in a Reg A+ offering are exempt securities under the Securities Act but the offering must be qualified in advance by the SEC before any sales can commence.

Regulation D

Another new exemption from registration created following the JOBS Act was the adoption by the SEC of new Rule 506(c). Similar to original Rule 506, which is now Rule 506(b), Rule 506(c) allows a company to sell an unlimited amount of securities to accredited investors. Under the new rule, however, companies may engage in general solicitation and advertising of its offerings, provided it undertakes to objectively verify the status of every investor in the offering as an accredited investor. Securities issued pursuant to Rule 506(c) are restricted securities under the Securities Act of 1933 and, as a result, cannot be sold or transferred in the absence of a registration statement being filed with the SEC or the availability of an exemption from such requirement, such as Rule 144.

Regulation S

Regulation S provides an exemption from the registration requirements of the Securities Act for offers and sales of securities that occur outside of the United States. Regulation S permits a U.S. company to issue securities to non-U.S. Persons in transactions outside of the U.S. without SEC registration. In order to comply with Regulation S the Company must establish that the investor is a non-U.S. person (as defined in the Rule) and that the transaction itself was consummated outside of the U.S.

About BANQ

Made in New York, BANQ® is a division of Cambria Capital, LLC Member FINRA | SIPC Check the background of this firm on FINRA’s Broker Check. Business Continuity Plan

Contact Details

sales@banq.co


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