SAFT; What is a SAFT and how does it work? What does it do for my ICO?
ICO Entrepreneurs, if you are using a SAFT, make sure you tie it to Reg D 506c. It's unwise to tie your SAFT to Reg A+ because unlike RegD, with Reg A+ you cannot predict that the SEC will Qualify your Reg A+. Tying a SAFT to a security transaction that is uncertain leaves you with excess risk.
For US companies, the most practical way is to sell their tokens under one of the SEC exemptions, such as Regulation A+ or Regulation D. This way, their ICO/token sale can be made SEC compliant. To clarify, for ICOs where the Token already exists then there is no need to use a SAFT, and so Reg A+ comes into its own as a superb route to liquidity.
Use of a SAFT tied to Reg D enables an ICO company to raise investment capital before their tokens are built and to provide lower prices for the early investors. It does not allow those investors to sell their positions early. The investors must wait till the relevant holding period (usually 6 months in Reg D) has passed before they can sell. Generally, companies prefer to presell their tokens, in order to cover the cost requirement of building them. Conducting a token/securities presale requires an SEC compliant method of raising capital, and a SAFT when combined with a Reg D might be able to solve this problem.
Linking the SAFT to Regulation D, in order to utilize the SEC exemptions allowing companies to raise capital is key. There are no such SEC exemptions for a freestanding SAFT.
In a Reg D offering, only accredited investors are allowed to invest. Reg S is a good partner for use with Reg D, it applies only to non-US investors. We at Manhattan Street Capital enable companies that raise capital using Manhattan Street Capital to make combined Reg D Reg S offerings. Reg S investors are not required to be accredited.
Manhattan Street Capital recommend a convertible note instead of a SAFT.
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