What is SEC (U.S. Securities and Exchange Commission)?

The United States Securities and Exchange Commission (SEC) - the US government agency is the main body that performs the functions of supervising and regulating the US securities market. The commission was established in 1934 under President Roosevelt. The purpose of the Commission was to restore investor confidence in the stock market during the Great Depression.

What is an ERC-1400 token?

ERC 1400 token is a cryptotoken built on Ethereum blockchain. It differs from other tokens built on ETH (ERC-20, ERC-777), because of special requirements for Security tokens.

Accelerate the issuance and management of securities on the Ethereum blockchain by specifying a standard interface through which security tokens can be operated on and interrogated by all relevant parties.

Security tokens differ materially from other token use-cases, with more complex interactions between off-chain and on-chain actors, and considerable regulatory scrutiny.

Security tokens should be able to represent any asset class, be issued and managed across any jurisdiction, and comply with the associated regulatory restrictions.

Requirements

Moving the issuance, trading and lifecycle events of a security onto a public ledger requires having a standard way of modeling securities, their ownership and their properties on-chain.

The following requirements have been compiled following discussions with parties across the Security Token ecosystem.

• MUST have a standard interface to query if a transfer would be successful and return a reason for failure.
• MUST be able to perform forced transfer for legal action or fund recovery.
• MUST emit standard events for issuance and redemption.
• MUST be able to attach metadata to a subset of a token holder's balance such as special shareholder rights or data for transfer restrictions.
• MUST be able to modify metadata at time of transfer based on off-chain data, on-chain data and the parameters of the transfer.
• MAY require signed data to be passed into a transfer transaction in order to validate it on-chain.
• SHOULD NOT restrict the range of asset classes across jurisdictions which can be represented.
• SHOULD be ERC20 and ERC777 compatible.

Token Holders Rights

1. Profit Share Right 

As partial owners of the company, common shareholders have the right to participate in a company's profitability for as long as they own the shares. Division of profits is based on the number of shares owned by a shareholder, and gains can be substantial to shareholders over time.

In addition to a share in profits generated by the company, shareholders also have rights to income distributions through dividend payments. If a company's board of directors declares a dividend in a certain period, common shareholders are in line to receive it.

2. Voting Right

ability to cast votes in a company's annual or general meeting. Major shifts within a publicly traded company must be voted on before changes can take place, and common shareholders hold the right to vote either in person or via proxy. Most common shareholder voting rights equate to one vote per share owned, resulting in greater influence from shareholders who own a larger number of shares.

3. Management Influence Right

Common shareholders also have the right to influence company management through the election of a company's board of directors. In smaller companies, the president or chairperson of the board is typically the individual who owns the largest share of common stock. Larger companies may have greater diversity in the common shareholder investor pool.

In either case, individuals in management of the company do not own enough of a stake in the company to influence who sits on the board of directors. Shareholders have the right to influence who holds management positions through control over election of board members.

4. Equity Ownership Right

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5. Preemptive Right

A preemptive right is a privilege that may be extended to certain shareholders of a corporation that grants them the right to purchase additional shares in the company prior to shares being made available for purchase by the general public in the event of a seasoned offering, which is a secondary issuing of stock shares. A preemptive right, also referred to as preemption rights, anti-dilution provisions, or subscription rights, is written into the contract between the stock purchaser and the company, although a few states grant preemptive rights as a matter of law unless specifically negated in a company's articles of incorporation.

6. Redemption Right

A redemption right is the right of the investors to force a company to repurchase their shares.