The Ontario Securities Commission (OSC) has agreed to allow TokenGX Inc, operator of token-issuance platform TokenFunder, to pilot a secondary market trading system for Ontario residents only.
The pilot can proceed for 12 months after the first issuance of an ITO (initial token offering) or until April 16th, 2021.
Investors can be accredited or non-accredited, though non-accredited investors may not invest more than $2500 CAD on the platform.
TokenFunder was perhaps the first token-issuance company to graduate from the OSC’s sandbox program and was subsequently exempted from the province’s dealer registration requirement.
According to the latest OSC filings regarding the company:
“TokenFunder subsequently completed an offering of the FNDR Tokens by way of an initial token offering (ITO)… TokenFunder completed the development of the Primary Distribution Platform and the Filer became registered as an Exempt Market Dealer (EMD) in Alberta, British Columbia, Ontario and Québec on April 17, 2019 to operate the Primary Distribution Platform.”
The same filing states that tokens distributed on Tokenfunder‘s Primary Distribution Platform will be made available for secondary trading on “the FreedomX platform” operated by TokenGX.
“(O)nly Participants that reside in Ontario will be permitted to participate on the Secondary Trading Platform,” the filing reiterates.
Traders will have to be vetted through a KYC/AML process at FreedomX:
“Participants who purchased Issuer Tokens through the Primary Distribution Platform will have previously been onboarded by the Filer. Parties that are seeking to purchase Issuer Tokens on the Secondary Trading Platform that did not purchase Issuer Tokens on the Primary Distribution Platform must first be onboarded by the Filer before being permitted to purchase Issuer Tokens.”
A strict limit on the amount traded will be imposed on non-accredited users of FreedomX:
“For Purchasers that are not Accredited Investors, the Filer, through the Transfer Controller and KYC Whitelist, will not permit the acquisition cost of the FNDR Tokens and Issuer Tokens acquired by the Purchaser on the Secondary Trading Platform to exceed $2,500 for all trades on the Secondary Trading Platform.”
In addition to maintaining a series of internal controls, TokenFunder will be responsible for monitoring the health of companies issuing tokens through them and making reports public on the platform:
“The Filer will require issuers to provide ongoing business disclosures to the Filer to be posted on the Secondary Trading Platform…The Filer will conduct an ongoing review of the issuer’s disclosures…to determine that it (sic) is complete, consistent and not misleading.”
For the duration of the pilot, the FreedomX platform will be “a closed ecosystem”:
“The Filer will not facilitate the trading of any tokens created on other platforms or that are able to be traded outside of the Secondary Trading Platform.”
Smart contracts modulating trades at FreedomX must be tested and reviewed, and a smart contract system will be utilized to manage Know-your-client (KYC) details:
“An investor’s information is added to a smart contract digital account identifier list (KYC Whitelist) that corresponds to the investor’s vetted investor category, such as accredited investor as defined in the Act and NI 45-106 (Accredited Investor). A prospective investor must be verified and approved by the Filer to be on the KYC Whitelist before they are permitted to participate in any offerings through the Primary Distribution Platform.”