Contributed by Martin Cornish, M.W. Cornish & Co.
Decentralised blockchain businesses and applications are proliferating in Europe just as they are in the U.S. and other jurisdictions. As is often the case, legal and regulatory developments in the U.S. have tended to dominate the headlines with the SEC bringing cases against a large number of token issuers on the basis that such tokens are ‘securities’ for U.S. regulatory purposes.
Similar but different issues arise in Europe where the definition of what constitutes a ‘security’ is much narrower. Tokens may, nevertheless, be regulated ‘financial instruments’ even if not a ‘security’. The correct analysis determines whether issuers may be covered by the EU Prospectus Directive (potentially requiring a registered, compliant prospectus) and whether marketing and other activities conducted by other persons (e.g. via social media) and directed at or carried out from within the EU is regulated. Several European regulators have made similar announcements to those made by the SEC – i.e. many tokens are securities or other regulated financial instruments requiring the production of a compliant prospectus unless carried out in compliance with relevant exemptions; and the need for EU regulated entities to be involved in the promotion of such tokens.”
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Martin Cornish, a leading European funds and regulatory expert, led a discussion covering the topic of “European ICOs and STOs – An Attractive Regulatory Landscape” during Hedge Connection’s Global Fund Forum 2018. As principal of M.W. Cornish & Co., which provides legal and other services, Martin Cornish is an acknowledged expert in the financial services field and has acted for securities, commodities, derivatives and foreign exchange broker/dealers, banks, investment banks, investment managers and insurance companies for over 30 years. Please note his prior article – Fund Raising in Europe.