SEC Charges Merrill Lynch in Unregistered Sales of Securities
Issuing securities can be a tricky affair. So much so, even the big boys mess up sometimes. This was apparent on March 6, 2018, when the Securities and Exchange Commission issued a press release announcing that they had successfully charged Merrill Lynch with gatekeeping failures during a security offering. The company in question was Longtop Financial Technological Limited, a China-based issuer.
The distribution was considered a success, raising $38 million. BUT — Merrill Lynch sold three million shares even though there were red flags around whether the distribution was registered correctly and therefore within the purview of the law.
The blockchain space might start seeing similar actions.
In his Feb. 2018 testimony, SEC Chairman Jay Clayton stated: “There should be no misunderstanding about the law. When investors are offered and sold securities — which to date ICOs have largely been — they are entitled to the benefits of state and federal securities laws and sellers and other market participants must follow these laws.”
Many current ICOs will be considered securities, and unless their issuance is fully compliant with regulations, the companies offering them will face the consequences. Merrill Lynch got stung for $1.25 million and, according to the press release, “more than $154,000 in disgorgement and prejudgment interest from commissions and fees earned on the improper sales.”
It’s not only the U.S. that has such regulations and enforcement — many jurisdictions globally have them. No ICO will be conducted without scrutiny from regulators.
Luckily, the Polymath platform allows securities issuers to rest easy.
Powered by our native token, POLY, we are ushering in a new era of Security Token Offerings. We foresee STOs becoming the dominant form of capital raising, as trillions of dollars’ worth of financial products upgrade to tokens to take advantage of the vast improvements made possible by blockchain technology.
To facilitate this next mega trend, we are building the world’s first decentralized protocol that empowers corporations to launch security tokens that are compliant with existing regulations.
By verifying every investor along with their cryptocurrency wallet address, the protocol ensures that only authorized investors that meet specific criteria unique to each offering can buy, sell, and trade such tokens.
All compliance is “baked-in” to each token so that decentralized and anonymously run exchanges will only be able to conduct trades between authorized participants, thereby assuring issuers that their tokens are only ever held by authorized investors.
Polymath is the catalyst to create the securities revolution by building an ecosystem in which issuers are guided through the complex legal and technological challenges inherent in security token offerings.
Trillions of dollars’ worth of securities are heading to the blockchain.
Why?
Because financial products work better as tokens.
Learn more about securities tokens by reading our white paper today.
About Polymath
Polymath Network (Polymath) is a decentralized platform that makes it easy to create security tokens. The Polymath ST-20 standard embeds regulatory requirements into the tokens themselves, restricting trading to verified participants only. The platform simplifies the complex technical challenges of creating a security token and aims to bring the multi-trillion dollar financial securities market to the blockchain.
