Security Token Offering
In Liechtenstein, the token has been legally defined by the Token and TT Service Provider Act (TVTG). According to the TVTG, a token is information on a TT system (blockchain) that (i) can represent, for example, claim or membership rights and (ii) is assigned to one or more TT identifiers (address). Based on this definition, the principle of "substance over form" has been codified. In other words, a token does not change the underlying right. A security token is therefore a financial instrument, such as a transferable security, issued in tokenized form.
Like any public offering of (non-tokenized) transferable securities, an STO may, therefore, in principle only be made if the issuer and/or offeror have previously published an approved securities prospectus that has been approved by the competent supervisory authority - in Liechtenstein, the Financial Market Authority Liechtenstein (FMA) - unless an exemption applies.
The prospectus shall contain, in particular, information about the issuer and about the transferable security (security token) to be offered. The aim of the securities prospectus is to provide potential investors with sufficient information (such as about the assets and liabilities, financial position, profits and losses, future prospects of the issuer and the rights and risks associated with these securities) to enable them to make an informed investment decision. The securities prospectus therefore forms the basis for prospectus liability..
Scope of review by the FMA
The FMA only examines the prospectus for completeness, coherence (absence of contradictions) and comprehensibility. The FMA does not verify the accuracy of the information contained in a prospectus, in particular warranted characteristics (e.g. security of the investment fund, high potential returns, highest possible security, low volatility). In principle, the respective issuer and the offeror are liable for the accuracy of the information provided in a securities prospectus.
The Prospectus Regulation was implemented into national law by the EEA Securities Prospectus Implementation Act (EWR-WPPDG) in Liechtenstein, where required.
According to Art. 4 (2) EEA-WPPDG, the "responsible persons [...] are at least the issuer or its administrative, management or supervisory body, the offeror, the person asking for admission to trading on a regulated market or the guarantor, as the case may be. They shall be liable to any investor for any loss suffered by him as a result of any incorrect information contained in the prospectus or in any supplement thereto, unless they prove that they are not at fault."
For this reason, the following persons in particular are affected by prospectus liability:
- Issuer: the one who issues or intends to issue securities, e. brings into legal circulation;
- Offeror: the one who offers securities to the public; and
These persons are liable to any investor for damage caused by incorrect or incomplete information in the prospectus, unless they can prove that they are not at fault. The question of whether a prospectus is inaccurate or incomplete is assessed on the basis of the objective horizon of the recipient. The decisive factor is, therefore, the "average investor" who, according to the statutory model - even if not in reality - makes his investment decision on the basis of the securities prospectus. The prospectus for an STO must, therefore, always be prepared against this background.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.