According to a recent blog post from the Singapore Exchange (SGX), companies already listing traditional equities on the SGX that are also planning an imminent ICO will have to prove their initial coin offering meets multiple investor protection-style standards.
First, companies already listed on the SGX that are also planning an ICO will have to disclose this to the SGX by, “consult(ing) SGX RegCo beforehand.”
Additional risks to companies producing ICOs were recently made crystal clear in the United States when the SEC settled with two ICO-issuers, Paragon and Airfox, fined them $250 000 each for issuing unlicensed securities and obligated them to pay back any unsatisfied ICO purchasers at cost plus interest.
Since the decision, many rumours have circulated on Twitter and elsewhere about the likely looming bankruptcy of many companies that issued-ICOs if they are indeed pursued for refunds by “harmed (ICO) investors.”
While many small cap crypto-tokens are now trading at 90% below all-time highs, it is impossible to estimate now, however, how widespread bankruptcies will become because many companies may have successfully listed their tokens on crypto exchanges and profited from selling them there to retail investors.
ICO’s themselves can be produced at a low cost though marketing expenses can be considerable.
The Singapore Exchange also says it, “retain(s) the right to require additional opinions to be obtained…(and) will also provide a checklist to the listed issuer on the compliance matters that should be addressed.”
Any company already listed on SGX also executing an ICO must also provide a list of disclosures to interested ICO-purchasers regarding:
- The rationale for, and risks (including operational, cybersecurity, manipulation, legal and reputational risks) arising from, the ICO.
- The use of funds raised and key milestones to be achieved in utilizing the fund.
- “Know-your-customer” checks to be conducted to address money laundering and terrorist financing risks.
- The accounting and valuation treatments for the ICO.
- The use of existing issuer funds to conduct the ICO, if any.
- The financial impact on the issuer as a result of the token issuance as well as the impact of any contingent settlement provisions.
- Any impact on existing shareholders’ rights.
- Any other information as SGX RegCo thinks necessary.
The SGX also advises that ICO-issuers host information sessions for potential investors, “…to ensure that they fully understand what an ICO entails.”
The SGX also requires comprehensive, statutory auditing to ensure, “…the ICO has been properly accounted for in (a company’s) financial statements,…associated risks have been adequately addressed and milestones on utilisation of funds raised have been adhered to.”
ICO issuers will also have to keep investors abreast of developments pertaining to the coin/token, and could be held to “additional measures.”