# Asset Tokenization

## What is Asset Tokenization?

Asset tokenization is the process of converting legal and economic claims against the underlying asset into composable smart contracts. In every jurisdiction in the world, asset tokenization is already being done at some scale. In the U.S., tokenization falls under the Uniform Commercial Code articles 9 through 12 - these speak to any asset issuer's ability to record stakeholders using any medium, from paper, to databases, and even blockchains. 

## What Regulatory Restrictions Exist?

In the U.S., the SEC makes a clear distinction between *tokenization* and *fundraising*. While tokenization converts economic and legal rights into useful tokens, fundraising lets issuers of tokenized securities raise money. 

Offerings of securities that are made available to sophisticated (e.g. accredited, qualified, professional) investors are typically exempt from SEC registration and require that the issuer files Form D with the SEC after fundraising is done.

Every other offering falls under more regulatory requirements, and any issuer that raises from retail (e.g. public, non-accredited) must comply with disclosing significantly more information using various forms provided by the SEC.

On Plume, asset issuers that need help from FINRA-registered brokers, exchanges, and law firms will be able to utilize their services form one app. We provide this table strictly for reference and education.

<table data-full-width="false"><thead><tr><th></th><th>Reg D</th><th>Reg A+</th><th>Reg CF</th></tr></thead><tbody><tr><td><strong>Who can invest?</strong></td><td>506(b): Maximum of 35 non-accredited investors<br>506(c): Only accredited investors</td><td>Public (retail investors)</td><td>Public (retail investors)</td></tr><tr><td><strong>How much can be raised in a 12-month period?</strong></td><td>Unlimited</td><td>Tier I: $20m<br>Tier II: $75m</td><td>$5m</td></tr><tr><td><strong>What SEC Form must be filed?</strong></td><td>Form D</td><td>Tier 1: Form 1-A, Form 1-Z<br>Tier 2: Form 1-A, Form 1-SA (annual), Form 1-K (semi-annual), Form 1-U (ongoing)</td><td> Form C, Form C-AR (annual), Form C-U (halfway through raise)</td></tr><tr><td><strong>Is public solicitation allowed?</strong></td><td>506(b): No<br>506(c): Yes</td><td>Yes</td><td>Yes</td></tr><tr><td><strong>Are there resale restrictions?</strong></td><td>506(b) mandatory 6 months lockup (for reporting companies) or 1 year to sell to the public under Rule 144<br>506(c): mandatory 3 months lockup, can sell to accredited </td><td>No restrictions under Tier 2</td><td>Must be held for 1 year</td></tr><tr><td><strong>Is a broker-dealer required?</strong></td><td>No</td><td>No, but often useful for compliance</td><td>Yes, must use licensed broker-dealer or funding portal as intermediary</td></tr><tr><td><strong>Is a transfer agent required?</strong></td><td>No</td><td>Tier I: no but recommended<br>Tier II: yes, must be an SEC-licensed TA</td><td>No but recommended to manage the cap table</td></tr><tr><td><strong>Is escrow required?</strong></td><td>No</td><td>No</td><td>Yes</td></tr></tbody></table>


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