The United States Securities and Exchange Commission (SEC) has released a statement warning investors about Initial Exchange Offerings (IEOs).
The SEC has issued an alert to investors far and wide. It explained that IEOs fall among new developments in the ever-evolving virtual asset space. Accordingly, investors should be cautious.
Besides, the Commission pointed out that similarities exist between IEOs and Initial Coin Offerings (ICOs). They stem from the fact that “they’re both initial offerings of virtual assets.”
Plus, they’re a way to raise capital, even though there’s a subtle difference, i.e. online trading platforms directly execute IEOs.
The SEC also pointed out some of the loopholes investors don’t notice before investing in an IEO.
For instance, even though certain trading platforms don’t register with the SEC, they still tag themselves as exchanges. Concurrently, claiming they execute due diligence.
“As an investor, it’s in your best interest to be careful when thinking of investing in an IEO,” the Commission advised.
Besides, the SEC revealed that most claims concerning IEOs vetted by these platforms end up being used inappropriately. Foremost, to attract investors, who receive inaccurate information about ostensibly high returns.
Regulatory requirements for CEOs
The SEC further gave out the regulatory requirements for investing in an IEO.
“Similar to ICOs, the IEO offerings tend to involve the provision and sales of securities,” the SEC noted.
These include the provision of some registration requirements as demanded by the federal securities laws. They require companies to provide virtual assets and vital disclosures about the company itself. As well as details about virtual assets and offering terms.
Additionally, if the IEO entails securities, the platform for trading online (where they offer the IEO) must be registered. Importantly, it’ll be done with the SEC.
Besides, IEOs acting as either a dealer or a broker are subject to legitimate regulatory demands. These demands don’t govern their conduct alone. But also provide vital safeguards for potential investors.
Finally, the SEC also mentioned that investors tend to depend on legal remedies when abroad. But, these remedies tend to differ from those available in the US.
Previously, the SEC solicited money from the token platform ICOBox and its CEO, Nikolay Evdokimov. Find out more here.