Unlike all ICOs, Security Token Offerings should be registered with the Securities and Exchange Commission (SEC). If you are planning to invest in an STO, you will get some rights to the firm or organization that issued the token just like shareholders. So, this makes them similar to shares.
The registration process included in the SEC is part of what makes STOs a safer option for shareholders or issuers. Since investors also get more security, fraudulent companies are warded off. That is why many companies are likely to hire the most trusted STO platform that provides technical as well as a legal support structure for securities issuance, including KYC, AML compliances, setting up of tokens and development services. The registration process of STOs is quite similar to the registration procedure of IPOs (Initial Public Offerings).
SEC has foreseen and made a number of legal acts to regulate several kinds of securities and their offerings or sales. They are known as regulations or rules. They facilitate you to manage offers of securities on different conditions, which currently covers an extensive range of possible requirements and differ in conditions.
These regulations include Reg A+, RegCF, Reg D, and Reg S. STOs are counted amongst those regulated token offerings that are registered with the SEC (Securities and Exchange Commission) or use many available securities exemption like Reg A+ to do it.
Such regulations are explained in the following section. Let’s get started.