Compliance Requirements - Issuer Regulatory Guide

Comprehensive guide to regulatory compliance, legal requirements, and best practices for issuers on CDAO Platform

Compliance Requirements - Issuer Regulatory Guide

Navigate the complex regulatory landscape with confidence using CDAO Platform's comprehensive compliance framework. This guide covers all essential legal requirements, regulatory obligations, and best practices for issuers raising capital on our platform.

⚖️ Compliance is Critical

⚠️ Legal Requirement: Compliance is mandatory, not optional
⚠️ Severe Penalties: Violations can result in fines, sanctions, and criminal charges
⚠️ Investor Protection: Regulations protect investors and market integrity
⚠️ Platform Requirements: CDAO Platform enforces strict compliance standards
⚠️ Professional Guidance: Always consult qualified legal counsel

🏛️ Regulatory Framework Overview

Key Regulatory Bodies

📋 Regulatory Authorities

Primary regulators governing securities offerings and platforms:

🇺🇸 United States

SEC: Securities and Exchange Commission
FINRA: Financial Industry Regulatory Authority
State Regulators: State securities administrators
CFTC: Commodity Futures Trading Commission
FinCEN: Financial Crimes Enforcement Network

🌍 International

FCA: Financial Conduct Authority (UK)
ESMA: European Securities and Markets Authority
CSA: Canadian Securities Administrators
ASIC: Australian Securities & Investments Commission
MAS: Monetary Authority of Singapore

Applicable Laws and Regulations

📚 Core Legal Framework

Essential laws and regulations affecting issuers:

🇺🇸 Federal Securities Laws

Securities Act of 1933: Regulates issuance and sale of securities
Securities Exchange Act of 1934: Governs secondary trading and reporting
Investment Company Act of 1940: Regulates investment funds
Investment Advisers Act of 1940: Governs investment adviser activities
JOBS Act: Modernizes capital formation rules

📋 Key Regulations

Regulation D: Private placement exemptions
Regulation S: Offshore transaction exemptions
Regulation A+: Mini-IPO exemption for smaller offerings
Regulation CF: Crowdfunding exemption rules
Rule 506: Private offering safe harbor provisions

📋 Exemption Requirements

Private Placement Exemptions

🔒 Regulation D Compliance

Most CDAO Platform offerings rely on Regulation D exemptions:

📊 Rule 506(b) Requirements

Unlimited accredited investors
Up to 35 sophisticated non-accredited
No general solicitation allowed
Pre-existing relationship required
Disclosure to non-accredited required
Form D filing within 15 days

📢 Rule 506(c) Requirements

Only accredited investors allowed
Must verify accreditation status
General solicitation permitted
No pre-existing relationship required
Enhanced marketing flexibility
Form D filing within 15 days

CDAO Platform Focus: Most offerings use Rule 506(c) for maximum marketing flexibility while maintaining accredited investor protection.

Accredited Investor Verification

✅ Investor Qualification

Ensuring investor eligibility is critical for compliance:

💰 Accredited Investor Criteria

Income Test: $200K individual / $300K joint income for 2 years
Net Worth Test: $1M+ net worth (excluding primary residence)
Professional Credentials: Series 7, 65, or 82 license holders
Knowledgeable Employees: Of private fund general partners
Entities: $5M+ assets or all equity owners are accredited
Family Offices: $5M+ assets with qualified personnel

🔍 Verification Methods

Income Verification: Tax returns, W-2s, pay stubs
Net Worth Verification: Bank statements, brokerage accounts
Third-Party Verification: CPA, attorney, or broker confirmation
Professional Licenses: FINRA license verification
Entity Documentation: Articles, operating agreements, financials

📄 Disclosure Requirements

Required Disclosures

📋 Mandatory Information

Information that must be disclosed to investors:

🏢 Company Information

Business Overview: Operations, products, services
Management Team: Key personnel backgrounds
Financial Statements: Audited or reviewed financials
Use of Proceeds: How investment funds will be used
Corporate Structure: Ownership and governance

⚖️ Legal and Risk Factors

Risk Factors: Material risks to the investment
Legal Proceedings: Ongoing litigation or disputes
Regulatory Issues: Compliance matters or violations
Related Party Transactions: Conflicts of interest
Prior Securities Violations: Historical compliance issues

💰 Investment Terms

Security Terms: Rights, preferences, restrictions
Valuation: Basis for share pricing
Dilution: Impact on existing shareholders
Exit Strategy: Potential liquidity events
Transfer Restrictions: Limitations on resales

📊 Performance Data

Historical Performance: Past financial results
Projections: Forward-looking statements (with caveats)
Key Metrics: Relevant performance indicators
Benchmarks: Industry or market comparisons
Assumptions: Basis for projections and estimates

Anti-Fraud Provisions

🚫 Prohibited Conduct

Activities that violate anti-fraud provisions:

Material Misstatements: False or misleading information
Omissions: Failing to disclose material facts
Manipulative Practices: Artificial pricing or trading
Insider Trading: Trading on material non-public information
Ponzi Schemes: Using new investor funds to pay existing investors
Unregistered Sales: Selling securities without proper exemption

📊 Ongoing Compliance Obligations

Periodic Reporting

📅 Regular Updates

Ongoing reporting requirements for active offerings:

📋 Required Reports

Quarterly Updates: Financial performance and key developments
Annual Reports: Comprehensive business and financial review
Material Event Notices: Significant changes or developments
Form D Amendments: Updates to initial Form D filing
State Filing Updates: Required state-level notices

⚡ Triggering Events

Management Changes: Key personnel additions/departures
Financial Milestones: Significant revenue or funding events
Business Changes: Pivot, acquisition, or strategic shift
Legal Issues: Litigation, regulatory action, or compliance matters
Ownership Changes: Significant shareholder transactions

Record Keeping Requirements

📁 Document Retention

Essential records that must be maintained:

Investor Records: Accreditation verification, subscription agreements
Marketing Materials: All offering documents and communications
Financial Records: Use of proceeds, financial statements, audits
Legal Documents: Corporate records, contracts, legal opinions
Compliance Documentation: Policies, training records, violation reports
Communication Logs: Investor correspondence, meeting minutes

🌍 International Compliance

Cross-Border Considerations

🌐 Global Regulations

Additional compliance requirements for international offerings:

🇪🇺 European Union

MiFID II: Markets in Financial Instruments Directive
GDPR: General Data Protection Regulation
Prospectus Regulation: EU-wide offering rules
AIFMD: Alternative Investment Fund Managers Directive
Anti-Money Laundering: 5th AML Directive requirements

🇬🇧 United Kingdom

FCA Rules: Financial Conduct Authority regulations
UK MAR: Market Abuse Regulation
FSMA: Financial Services and Markets Act
UK GDPR: Data protection requirements
MLR 2017: Money Laundering Regulations

🛡️ AML and KYC Compliance

Anti-Money Laundering Requirements

💰 AML Program Elements

Core components of an effective AML compliance program:

🔍 Customer Due Diligence

Identity Verification: Government-issued ID validation
Beneficial Ownership: Ultimate ownership identification
Source of Funds: Verification of wealth origin
PEP Screening: Politically Exposed Person checks
Ongoing Monitoring: Continuous risk assessment

📊 Transaction Monitoring

Suspicious Activity: Unusual transaction patterns
Currency Reporting: Large cash transaction reports
Wire Transfers: Enhanced scrutiny for wire payments
High-Risk Jurisdictions: Additional controls for FATF countries
SAR Filing: Suspicious Activity Report submissions

Know Your Customer (KYC) Procedures

👤 Investor Verification

CDAO Platform KYC requirements for all investors:

Identity Verification: Government ID and biometric checks
Address Verification: Utility bill or bank statement
Financial Verification: Income and net worth documentation
Professional Verification: Employment and credential checks
Background Screening: Criminal and regulatory history
Ongoing Updates: Periodic re-verification requirements

⚡ CDAO Platform Compliance Support

Built-in Compliance Tools

🛠️ Platform Features

CDAO Platform provides comprehensive compliance infrastructure:

✅ Automated Compliance

Accreditation Verification: Automated investor qualification
Document Generation: Compliant offering materials
Filing Assistance: Form D preparation and submission
Record Keeping: Secure, organized document storage
Reporting Tools: Automated periodic updates

🔒 Security and Monitoring

KYC/AML Screening: Comprehensive investor vetting
Transaction Monitoring: Suspicious activity detection
Audit Trails: Complete activity logging
Data Protection: Bank-level security measures
Regulatory Updates: Real-time compliance alerts

Compliance Support Services

🤝 Expert Assistance

Professional compliance support available through CDAO Platform:

Legal Network: Access to qualified securities attorneys
Compliance Consulting: Expert guidance on complex issues
Regulatory Updates: Ongoing alerts about law changes
Training Programs: Compliance education for issuers
Best Practice Guidance: Industry-leading compliance standards
Audit Support: Assistance with regulatory examinations

❌ Common Compliance Mistakes

Critical Errors to Avoid

🚫 High-Risk Violations

Inadequate Investor Verification: Failing to properly verify accreditation
General Solicitation Violations: Public marketing without proper exemption
Incomplete Disclosures: Omitting material risks or information
Missing Form D Filings: Late or incomplete regulatory filings
Poor Record Keeping: Inadequate documentation and retention
Unlicensed Activity: Operating without required licenses or registrations
International Violations: Ignoring cross-border compliance requirements

🆘 Getting Help

⚖️ Compliance Support

Need help with compliance matters?

Compliance Team: compliance@support@cdao.vc
Legal Network: legal@support@cdao.vc
Issuer Support: issuers@support@cdao.vc
General Support: support@cdao.vc
Help Center: http://companydao.org/support

⚖️ Legal Disclaimer

This guide provides general information only and does not constitute legal advice. Securities laws are complex and change frequently. Always consult with qualified legal counsel before making compliance decisions or conducting securities offerings.

When in doubt, seek professional guidance!