On August 5, Republic, a startup investing platform, announced that upcoming fundraising commitments for its Republic Note security token had been exhausted under two separate exemptions.
Total, The company is committed to raising $ 16 million, of which $ 11 million has already been committed under Reg. Another $ 5 million is earmarked for public investors awaiting Reg. A + qualification. This comes from previous private funding rounds.
But what does that mean?
US securities law is a mess, and The process of bringing tokenized securities to the traditional market has taken longer than expected. Part of that is the complexity of the various exemptions from being fully registered with the SEC.
The fascinating thing about the Republic’s approach is that it tries to convert one way of offering tokens to the public into another, with investors in the previous Reg. D round eventually becoming part of the upcoming Reg. A + implementation, if anything goes well. Speaking to Cointelegraph, Republic CEO Kendrick Nguyen outlined the plan for the inclusion of “Reg. D investors in Reg. A + ”.
SEC homemade alphabet soup
Reg. D is an easier filing that allows an investor seeking company to raise infinite capitalas long as it only comes from accredited investors, which is an SEC saying for people with big bucks.
To bridge the gap between traditional investors and venture capital opportunities, Reg. A + limits the total possible investment to USD 50 million, but does not limit the types of investors who can participate. However, Reg. D is something that you submit before you keep your sale going, and then: If the SEC finds evidence that it didn’t limit the investment to accredited investors, the commission can collapse the entire company.
Unlike the more criminal means of monitoring Reg. D, Reg. A + requires more proactive filing. The republic’s change plan is very unusual, but “it is actually possible”said Anthony Tu-Sekine, partner at Seward Kissel and head of the company’s Blockchain and Cryptocurrency Group. However, he noted, “I don’t think I’ve ever seen a Reg. D and a Reg A + together.”
According to Tu-Sekine, the challenge is to keep these groups separate:
“The republic has to ensure that it keeps these two separate, or at least it has to ensure that Reg. D’s public notes are not in any way confused with the freely negotiable public notes.”
According to Nguyen, that’s planned Republic will be able to move Reg. D investments into the Reg. A + investment stack, as the total amount will never reach the $ 50 million mark. This makes sense, however, as the stated mission of Republic Note and the platform as a whole is to provide the public with access to private investment opportunities. That’s what regs are for. A and A +.
The move to expanded funding and reasons not to go for $ 50 million
Nguyen said the expanded funding round was in response to more interest than expected: “At first we didn’t even want to raise $ 8 million.”. The change to $ 16 million should satisfy community response, he said. “Due to the structure of our token economy, we only have a relatively limited number of our tokens available.”
It’s a fascinating plan, and the fact that Republic is an investment platform is likely to make the company more comfortable working with various SEC rules.
“The legal framework in the US isn’t going to change anytime soon, but it gives people enough tools to engage the community, accredited and unaccredited. It’s complicated and takes time, but you can do it smugly. “