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Regulation Crowdfunding
Offerings: An Educational & Informative Page

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What Is A Digital Security?

A digital security token, regulated by the SEC (U.S. Securities and Exchange Commission), is a type of digital asset that represents ownership or investment in a company or project.
It works similarly to traditional stocks or securities you might be familiar with, but instead of having a physical certificate, it’s stored electronically on a secure digital platform, often using blockchain technology, with the digital security being held inside of the user’s WEB3 wallet of choice!

How Does A Digital
Security Work?

Digital Representation of Ownership:

  • Just like a paper stock certificate represents ownership in a company, a digital security token does the same, but in a digital form.
  • It’s like having virtual proof of your investment inside of your WEB3 wallet.
  • The digital security, in most cases, also has the investment contract coded into the smart contract that is deployed for the digital security token on a particular blockchain.
  • In most cases, investors can invest via digital currencies (BTC, USDC on Polygon or ETH chain, etcetera), as well as being paid any dividends, profit share, etcetera via any currency the company deems appropriate.

Regulated by the SEC:

  • The SEC is a government agency that oversees and regulates financial markets in the United States.
  • When a digital security token is regulated by the SEC, it means it follows specific rules and requirements set by the SEC to protect investors and ensure fair practices.
  • In most cases and offerings, this also gives the issuer the legal right to share revenue, profits, dividends, and other payments with the shareholders / digital security token holders.

Blockchain Technology:

  • Digital security tokens often use blockchain, which is a secure and decentralized digital ledger.
  • Blockchain ensures that the token’s ownership and transactions are transparent, tamper-proof, and verified by multiple parties.
  • This can be facilitated through a process called “whitelisting”, in which the digital security token holder will KYC/AML and then connect & claim that digital wallet, thus ensuring the company has passed all due diligence practices required of them by the SEC for its investors.
  • The wallet is then added to a “whitelist” that verifies that the wallet has the right to own and house the digital security. If the wallet it is not whitelisted, then it cannot legally own or house the digital security.

Investment and Trading:

  • People can buy, sell, and trade these digital security tokens on approved platforms, just like you would with traditional stocks on stock exchanges.
  • All SEC & funding regulations and stipulations apply to this digital security. These regulations & stipulations include, but are not limited to, KYC/AML, accredited vs. non-accredited rules, transfer periods, etcetera.

Compliance and Investor Protection:

  • Regulation by the SEC means that the issuer of the digital security token needs to comply with certain reporting and disclosure requirements.
  • This provides investors with essential information to make informed decisions and reduces the risk of fraud or scams.
  • This also ensures the business can continue to operate, within the bounds of the law, without fear of regulations and laws changing in the future that could harm or shut down the business.

Summary

A digital security token regulated by the SEC is a digital representation of ownership or investment in a company or project. It operates under specific rules set by the SEC to safeguard investors and ensure transparency in the financial market.

What Is A Regulation Crowdfunding Offering?

Regulation Crowdfunding is a method that allows small businesses and startups to raise funds from the general public, including non-accredited investors, using online crowdfunding platforms like Akemona.com. 

The U.S. Securities and Exchange Commission (SEC) created this regulation to make it easier for small businesses to access capital and for ordinary people (non-accredited, or “retail” investors) to invest in promising ventures.

How Regulation
CF “Reg CF or Reg C” Works.

Eligibility

  • Small businesses seeking to raise funds through Regulation Crowdfunding must meet certain criteria set by the SEC.
  • They are subject to fundraising limits and disclosure requirements to protect potential investors.

Crowdfunding Platforms

  • The business works with an SEC-registered crowdfunding platform, like Akemona.com, to create an online campaign.
  • This campaign acts as a pitch to attract potential investors.
  • Crowdfunding platforms, like Akemona.com, that issue digital securities usually allow investors to invest via digital currencies (if approved by the SEC & FINRA) like BTC or USDC on ETH or POLYGON blockchains.

Investment Options

  • Individuals interested in supporting the business can invest money in exchange for securities, such as equity (ownership) or debt in the company.
  • These securities represent the investors' stake in the business.

Investment Limits

  • There are limits on how much individuals can invest in a Regulation Crowdfunding offering.
  • These limits are based on their income and net worth to prevent over-investment in high-risk ventures.

Disclosure & Transparency

  • The business is required to provide comprehensive information about its operations, financial health, business plans, and potential risks to potential investors.
  • This disclosure ensures transparency and helps investors make informed decisions.

Fundraising Goal

  • The business sets a fundraising goal and a specific time frame to reach it.
  • If the goal is not met within the given timeframe, the funds are returned to the investors.

Completion & Reporting

  • If the business successfully reaches its fundraising goal, it receives the funds from the investors.
  • Afterward, the business is obligated to provide updates on its progress and financial performance to the investors.

Who Can Invest?

Regulation Crowdfunding allows a wide range of investors to participate, including both accredited and non-accredited individuals. Here’s a simple breakdown.

Accredited Investors

  • These are individuals who meet certain financial criteria set by the SEC, such as having a high net worth or a significant income.
  • They have more flexibility in their investment amounts, and generally have no limit to what dollar amount they can invest per offering.

Non-Accredited Investors

  • These are everyday people who don't meet the financial criteria to be considered accredited investors.
  • Regulation Crowdfunding provides them with opportunities to invest smaller amounts in startups and small businesses they believe in.
  • How much a non-accredited investor can contribute is up to the issuer and platform, but most generally accepted rules set by the SEC state that a non-accredited investor can invest $2,500 OR 5% (whichever is higher) of their annual income per offering.
  • There are other stipulations placed on non-accredited investors, and that is why the ultimate decision is made at the regulated platform level.

Summary

By allowing both accredited and non-accredited investors to participate, Regulation Crowdfunding aims to democratize investment opportunities and support entrepreneurship while still providing some safeguards to protect investors.