In one of our previous articles, we discussed the application of the Singapore Payment Service Act (PSA) and Securities and Futures Act (SFA) to digital token offerings. You can check the article here. Make sure that you understand the differences between security and utility tokens since only security tokens are subject to the relevant regulations for coin offerings.
Another important consideration should be the exemptions for the prospectus requirement. A prospectus is not required for:
- Small (personal) offers that do not exceed S$5 million within any 12-month period;
- Private placement offers made to no more than 50 persons within any 12-month period;
- Offers made to only institutional or accredited investors.
Another important accent to state in advance is that the requirements for the contents of a prospectus can not be bypassed by imposing conditions on investors that would waive compliance with the SFA regulations.
Having mentioned the considerations above it is time to start with the essentials. Here are the necessary contents for your ICO prospectus.
The Rights and Liabilities Attached to the Tokens
The SFA provides regulations on the contents of the prospectus. Under Article 243 of the ACT a prospectus shall contain all the information that investors would reasonably require to make an informed assessment of the matters of the ICO.
The most important part of this information is the rights and liabilities attached to the tokens. You will need to specify what rights will the tokens hold and how these rights can be exercised.
Information on the Issuer
Since digital tokens are not units or derivatives of units in a business trust, you will also need to provide information on the entity that issues the tokens, including:
- assets and liabilities;
- profits and losses;
- financial position and performance and;
- prospects of the entity
Along with the general information on the issuing entity, you must provide data about the persons or entities that control the issuer like owners and directors.
How Specific Should You Be in your Prospectus
The SFA takes into consideration that some information that should otherwise be included in the prospectus may reasonably be expected to be known to the professional advisers of such investors. However, as a rule of thumb, you should try to include all matters that investors may expect to find in the paper. Putting more information will not harm your ICO.
Keep in mind that if you don’t want to make your prospectus too heavy with information you can always include this information in another document to be incorporated by reference in the prospectus.
Drafting a Profile Statement
Your prospectus must be accompanied by another document – a profile statement for the offer (the ICO). The profile statement contains an identification of the person(s) making the offer and signing the statement, the nature of the tokens as securities, the nature of the risks involved in investing in them and details of all amounts payable in respect of the securities.
Liability for False and Misleading Statements
You should be very careful not to include false or misleading statements in your prospectus or profile statement. If you do this you shall be liable on conviction to a fine not exceeding $150,000 or to imprisonment for a term not exceeding 2 years.