The security token industry is anticipated to go big in 2019. One of the key prospects security tokens bring to the table, is their ability to unlock liquidity. Security token offerings (STOs) have been recently gaining momentum among financial institutions, service providers and regulators. They can make small, private non-liquid securities more accessible for everyone.
As the new year kicked off, SEFtoken kickstarted its project by becoming the first firm to issue a compliant digital security with “covered warrant” structure. The structure is reportedly more efficient than existing token securities fund raising methods (STOs, TAOs, CSOs) and allows asset owners around the world to easily issue compliant US digital securities.
STOupdates got in touch with Executive Director of SEFtoken Anthony Waller and talked about how a tokenized warrant structure opens new doors for firms and investors in the industry.
SEFtoken, Inc. is a US based firm incorporated in Delaware that has originated a tokenized security warrant that entitles token holders to a direct investment in a fully regulated, licensed, exchange infrastructure. The firm is conducting simultaneous Reg D (U.S. Accredited Investors Only) and Reg S (non U.S. Investors) offerings (per SEC).
Covered Warrant and SEFtoken
SEFtoken has formulated a brand-new investment instrument that will open a gateway for investors interested in the security token world. The covered warrant provides a holder with the right to convert the warrant into equity shares via compliant digital security offering for the underlying asset, which is a licensed and regulated Financial Market Infrastructure.
In an exclusive interview to STOupdates, Executive Director at SEFtoken, Anthony Waller said ” The covered warrant structure adopted by SEFtoken makes it accessible for the digital security industry to have a high standard of compliance, in addition to have a disclosure for satisfying the not so friendly US regulatory framework.”
- The Tokenized Warrant supersedes existing token securities fund raising methods (STOs, TAOs, CSOs) by ensuring regulatory compliant fundraising for cross jurisdictional assets under both US and Australian securities laws.
- The current laws in Australia do not allow companies to issue digital shares. Irrespective of this, the tokenization of covered warrants is a workaround to the current compliance concerns regarding STOs.
- The sale of tokenized warrants will allow the issuance and selling of digital securities in jurisdictions where presently it is not possible: such as, issuing securities in the United States backed by shares in an Australian corporation.
Involvement of Mercari Pty Limited
Mercari Pty Ltd (Mercari) is an Australia based firm established in 2003 in order to build and and operate an OTC market place. It has operated a regulated Swap Execution Facility in Australia since 2005. Utilizing this license the firm operates a market known as Mercari Direct.
Mercari direct is allowed to trade several classed of financial products which includes interest rate derivatives, foreign exchange derivatives, commodity derivatives, energy derivatives, environmental derivatives. Investors upon purchase of the SEFtokens are set to have an exercisable convertible interest in Mercari.
- Mercari has granted the Issuer rights to subscribe to a maximum of 47% of the fully-diluted shareholding of Mercari post-subscription.
“The holders of SEFtoken will have an opportunity to own not just 5 or 10 percent but a whooping 47% of a properly capitalized existing real exchange. This is a time for investors to come in and take the benefits as the exchange is all set to to expand itself into a regulatory approved DLT based digital securities market” said Anthony Waller.
Interestingly, the current Australian securities law does not permit for the tokenization of securities and consequent trading of security tokens. The transaction structure proposed by the Issuer and Mercari ensures compliance with both Australian and U.S. corporations and securities laws. SEFtoken purchasers will be able, within the terms of the Smart Contract, to exercise their right to present the SEFtokens to the Issuer and the Issuer will convert the SEFtoken into Shares.
The process of converting SEFtokens to shares will be conducted in accordance with Australian securities law and will be published on the Issuer’s corporate website prior to the first possible conversion date of the warrants encoded into the SEFtokens.
Anthony Waller further stated that “One of the key point behind SEFtoken is that, the firm is not a newcomer to the market struggling against the regulatory standards but already has acquired all the regulatory frameworks necessary for its smooth functioning and in addition, has over 13 years of operating history as the underlying asset of the SEFtoken™ Digital Security.”
Issuing and Trading Summarized
- The SEFtoken covered warrant will be issued by SEFtoken, Inc. (Issuer).
- The Issuer will then be issued shares in Mercari enough to convert SEFtokens issues to Mercari shares.
- SEFtoken will be a security pursuant to the Securities Act but is exempted from registration with the SEC.
- But, SEFtoken will be a restricted security which means that there will be a holding period of 12 months. (after expiry the SEFtokens will tradeable on Issuer-designated exchanges/platforms.)
- SEFtoken’s exercisable right to convert to Mercari shares will only be exercisable for 2 years after issue. The SEFtokens will expire 7 years after issuance
- The digital warrant offering will be held on the Securitize platform.
- SEFtoken is aiming to raise between $31 million and $125 million for its SEC-compliant digital warrant offering that is exempt from registration under regulations D and S.
- The offering will be available to accredited investors only.
For More Info: Visit https://seftoken.io/