Tokenise Stock Exchange

GENERAL 

These risk warnings are provided by Tokenise Stock Exchange International Ltd (“Tokenise Stock Exchange” “We” “Us”) and provides you with important information about the risks associated with the service we provide. If you wish to make an investment in any security token listed on the Tokenise Stock Exchange, you must instruct a broker member and you should seek independent advice to inform your decisions in relation to the suitability of the investment or investment service. 

NO ADVICE

The Tokenise Stock Exchange does not endorse or sponsor any security or security tokens listed and traded on the exchange or any issuing company. No statement on our website is to be construed as a recommendation to purchase or sell a security, or to provide investment advice Any information provided by Tokenise Stock Exchange is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular issuing company and or the security token listed on the exchange. Advice from an independent financial advisor is strongly advised if you are unsure as to whether to invest in a security offering listed on the Tokenise Stock Exchange.  

PROVISION OF INFORMATION

The information is provided ‘as is’ solely for general education and information purposes and should not be considered complete, precise, or current. Many of the matters discussed are subject to detailed rules, regulations, and statutory provisions which should be referred to for additional detail and are subject to changes that may not be reflected in the information provided.

All information/content herein is provided "as is" without warranty of any kind and is obtained by the Tokenise Stock Exchange from sources believed by the Tokenise Stock Exchange to be accurate and reliable. However, because of the possibility of human and mechanical error as well as other factors, neither the Tokenise Stock Exchange nor the Information Providers are responsible for any errors or omissions.   

 The Tokenise Stock Exchange and the Information Providers make no representation and disclaim all express, implied, and statutory warranties of any kind to you and /or any third party, including any warranties of accuracy, timeliness, completeness, merchantability, and fitness for a particular purpose. 

Neither the Tokenise Stock Exchange nor the Information Providers shall be liable in any way (whether for negligence, breach of contract, tort, or otherwise) to you or to any other individual or entity for any unavailability, delays, inaccuracies, errors or omissions in the content or website or service or for any actions taken in reliance thereon or for any damages, whether in tort, contract or otherwise (unless due to wilful tortious misconduct or gross negligence) arising therefrom, or occasioned thereby or by reason of non-performance, omission, interruption, or termination, of the content or the website or service by which they are provided for any cause whatsoever. Under no circumstances will the Tokenise Stock Exchange and/or an Information Provider  be liable for any indirect, punitive, special, consequential or incidental damages. 

SECURITIES LISTED ON THE TOKENISE STOCK EXCHANGE

All investments involve a degree of risk. The trading of some Securities listed and traded on the Tokenise Stock Exchange may carry a high level of risk and may result in gains and/or losses including all the initial capital invested. Information about the type of securities listed and traded on the Tokenise Stock Exchange is outlined in each Prospectus. General information about the types of Securities that are listed and traded on the Tokenise Stock Exchange can be found below. You should ensure you fully understand such risks before instructing Tokenise Brokerage to trade on your account as you are solely responsible for the decision to trade. If you are uncertain as to whether a security offering is appropriate for your circumstances or needs, you should seek independent professional advice.

Most start-ups, early stage and other growth focused businesses fail. If you invest in a business such these which may be listed on the exchange, there is a likely probability that you may lose all of your invested capital rather than see a return of your capital or profit. You should not invest more money, in these types of businesses, than you can afford to lose without altering your standard of living. Please also note that if a security you invest in fails; neither the issuing company, Tokenise Stock Exchange, Tokenise Brokerage Limited, nor any other organisation will compensate you for the loss, of your invested capital. 

TYPES OF RISK

Below, we describe some of the risks that may be relevant to some of the securities and the security tokens we may list on the exchange. All investments involve a degree of risk. The trading of some securities listed and traded on the Tokenise Stock Exchange may carry a high level of risk and may result in gains and/or losses including all the initial capital invested. Information about the specific types of risk associated with a particular security that is  listed on the exchange is outlined in each individual Prospectus.

Security Tokens

Security tokens are digital securities.  Investors face risks associated with fluctuations in price of the digital securities and the custody and technology connected to the settlement of trading. 

Security tokens can represent equity (shares), debt instruments, fractional ownership of assets, or contracts for future revenues (such as a royalty) issued by an issuing company. The security tokens are a digital certificate representing an individual’s holding pro rata to the number of securities issued. The security tokens will be held by the central securities depository ("CSD") on behalf of your nominated broker. This poses the following risks: 

  • the CSD, or custodian may be an unconnected party of the nominated broker and may have insufficient controls to protect the ‘beneficial owners. 

  • the security exchange, CSD, nominee company and custodian may rely upon Distributed Ledger Technology ("DLT"). DLT technology is relatively new and therefore may be subject to unknown threats.

  • as with all dematerialised securities any nominated broker will have ownership/ legal title to the digital security and investors will have beneficial ownership alongside other beneficial owners. 

  • the security exchange, nominated broker and/or CSD, may have minor or significant conflicts of interest with the beneficial owners, the promoters of the investment or the fundraising by the issuer; and 

  • the security exchange, nominated broker, and/or the CSD, may cause delays and materially affect the ability of the beneficial owner to sell all or part of their investment due to their inability to provide adequate services. 

  • The credentials conferring access to, and control of the digital securities may be lost or stolen 

Technical Risk

The Tokenise Stock Exchange and associated platforms will be subject to the risk of technological difficulties that may impact the trading of the security tokens, which include, without limitations, failures of any blockchain on which the security tokens rely or the failure of smart contracts to function properly. Trading in the security tokens will depend on the operation and functionality of the platforms and, if such system were to fail for any reason, trading in the security tokens would not be possible until such failure was corrected, and full functionality restored and tested. Any such technological difficulties may prevent the access or use of the security tokens. This could have a material impact on the Tokenise Stock Exchange’s ability to execute or settle trades of the security tokens, to maintain accurate records of the ownership of the security tokens and to comply with obligations relating to records of the ownership of the security tokens, which could have a materially adverse effect on the token holders hence the investors.  

The Tokenise Stock Exchange, the security tokens and any blockchain on which the debt instruments products / technologies / services and/or securities relies upon, may be the target of malicious cyberattacks or may contain exploitable flaws in their underlying code, which may result in security breaches and the loss or theft of security tokens or other securities which may trade on the Tokenise Stock Exchange. If such cyber-attacks occur or security is compromised, this could seriously curtail the utilisation of the security tokens and cause a decline in the market price of the security tokens. 

Funds

A fund is a term that covers different types of structure, normally Open Ended Investment Companies (‘OEICs’ which is by far the most common), Mutual Funds or Unit Trusts. An Investor will generally not be given a choice as to how to structure of a particular fund, as each fund will already have its own preferred structure. Most funds can be held in tax-efficient wrappers. Funds are arrangements which enables a number of investors to 'pool' their money, in order to gain access to professional fund managers in a cost effective manner. Investments held by these funds may typically include gilts, debt instruments, and quoted equities, but depending on the type of scheme, may hold higher risk instruments such as property, derivatives, unquoted securities, and other complex products. The value of a fund, and the income derived from it, can decrease as well as increase and you may not necessarily get back the amount you originally invested. Additionally, funds bear investment management risks, insolvency risks and possibly liquidity risks (see below). You should ensure that you understand the nature of any fund before you invest in it. Some of the more common risk factors are detailed below in the ‘Sector/asset-specific risks’ sections. 

Volatility Risk, Market Fluctuations, sector/asset-specific risks 

This section lists some common risk factors relating to the geographical area, industry and/or asset type applicable to a particular security. 

  • Different securities, including security tokens, carry varying levels of risk depending on the geographical region and industry sector in which they operate. You should make yourself aware of these specific risks prior to investing. 

  • Funds do not guarantee a positive return and you could get back less than you invested much like any other investments. Additionally, the underlying assets of these funds may use complex hedging techniques through the use of derivative products. 

  • Securities issued by smaller companies are often more violate unless liquid than securities issued by larger and more established companies. 

  • Underlying investments in emerging markets can be less well-regulated than established markets. There is an increased chance of political and economic instability with less reliable custody, dealing and settlement arrangements. These market(s) can be less liquid. If investing in markets that are affected by currency exchange rates, the investment’s value could either increase or decrease in response to changes in those exchange rates. These investments therefore carry more risk.

  • Specialist asset classes due to their nature can be subject to specific sector risks. Investors should ensure they read all relevant information in order to understand the nature of such investments and the specific risks involved.

  • Generally, debt instruments issued by governments in developed countries and established companies will be more stable than those issued by governments in emerging markets or less established, smaller issuers listing on a securities/stock exchange; in the event that the issuer experiences financial difficulty, there may be a risk to some, or all of the capital invested. Any historical or current yields quoted should not be considered reliable indicators of future performance. 

  • The rights attached to different types of security tokens may vary, investors should be aware that they may not have voting rights attached to certain types of security tokens, and that some security tokens may not have any form of income attached to them as they solely represent the ownership of a non-revenue generating asset. Investors should be aware of what rights are attached to any security tokens they may look to acquire before buying them. Information about individual security tokens may be found in this website. 

  • Investors should be aware that any income distributed to holders of a security token will only be credited to the holder’s nominated broker account rather than to a personal bank account. 

  • Security tokens that represent shares of an issuing company carry varying risks brought about by the performance of world markets, interest rates, taxes on income and capital, foreign exchange rates, liquidity (the ease with which a security can be traded on the market) and the financial performance of the issuing companies. The value of, or income from such security tokens can go down as well as up and you may not get back the original amount you invested. 

  • Security tokens purchased on the Tokenise Stock Exchange may carry a higher degree of risk of losing money than other major national stock exchanges because the Tokenise Stock Exchange is an international exchange. Generally, requirements on issuers that are listed on a major national stock exchange may be more stringent than those for issuers with a market listing on an international exchange. There is also usually a wider spread between the buying price and the selling price of the security tokens and if they have to be sold immediately, you may get back less than you paid for them due to a lack of liquidity. The price of these security tokens may change quickly, and they may go down as well as up. It may also be difficult to obtain reliable information about their value or the extent of the risks to which they are exposed. 

  • Security tokens that represent a holding in an Exchange Traded Funds (ETFs). ETFs are investment funds, traded like shares which typically but not exclusively hold assets such as shares, commodities, or debt instruments. They often closely track the performance of a financial index, and as such, their value can go down as well as up and you may get back less than you originally invested. Some ETFs rely on complex investment techniques, or hold riskier underlying assets, to achieve their objectives and therefore you should always ensure you read the documentation provided to ensure you fully understand investment risks you are taking on before you invest.  

Security tokens that represent debt instruments 

Debt instruments are loans to a government or company. They are also known as debt investments and cover the categories of Debt Securities and Fixed Income Investments. Generally  they will be more stable than share-based investments, but in some circumstances (particularly when interest rates are changing) they can be more volatile. Debt instruments issued by governments in developed countries and companies are generally more stable than those issued by governments in emerging markets or issuers, and in the event of an issuer facing financial difficulty there may be a risk to some or all of the capital invested. 

Security tokens that represent contracts for future revenues 

Security tokens that are fractionalised contractual rights to receive a percentage of revenue or profits. These security tokens carry varying risks brought about by the performance of world markets, interest rates, taxes on income and capital, foreign exchange rates, liquidity (the ease with which a security can be traded on the market) and the financial performance of the issuing companies. The value of, or income from, security tokens can go down as well as up and may cease altogether, and you may not get back the original amount you invested. 

Complex products 

Some products (such as Hedge Funds, Structured Products, Securitisation Vehicles, Warrants and Venture Capital Trusts) are defined as complex. There is no single definition for complex products but products that fit into this category are generally those where: 

  • there is an actual or potential liability greater than the amount invested for the client; or 

  • the product is a derivative or has derivatives embedded in it; or 

  • there are limited opportunities to sell the product; or

  • adequate comprehensive information is not generally available on the product. 

These types of products carry additional risks to those described above for the other categories of investments and you must note the additional risk warnings that accompany these products. In some cases, this category of investment may not be offered to some investors without undertaking further enquiries. 

Security tokens that represent non-mainstream investments 

Certain investments are deemed to be non-mainstream collective investment (these include unregulated collective investment schemes, some special purpose vehicles and other complex investments) and are not subject to the same regulatory protections as other investments. In some cases, this category of investment may not be offered to some investors without undertaking further enquiries.

Currency risk 

Investments denominated in a currency other than US Dollars, Euros or Sterling or ones that undertake transactions in markets, which include the financial markets of developing countries /emerging markets, may expose you to greater risks caused by fluctuations in foreign exchange rates. This can adversely affect the value of your return and the value of your investment. Investments in emerging markets are Id to additional risks, including accelerated inflation, exchange rate fluctuations, adverse repatriation laws and fiscal measures, and macroeconomic and political factors. 

Liquidity Risk 

There may be difficulty in selling an investment. There are a number of factors which may cause or induce illiquidity, including but not limited to insolvency of the investment, adverse stock market conditions, the performance of world markets, interest rates, taxes on income and capital, foreign exchange rates, selling restrictions placed on funds by their managers (sometimes referred to as gating, lockups, notice periods or suspension of redemptions). In these circumstances, you may not be able to sell such investments in a timely manner and the value of those investments may fall significantly. 

Stabilisation / Initial Public Offerings (IPOs) / New issues 

When securities are newly issued, the market price is sometimes artificially maintained by the issuer during the period when a new issue is to be sold to the public. This is known as stabilisation and may affect not only the price of the new issuance but also the price of other securities relating to it. Stabilisation is allowed, as long as a strict set of rules is followed, in order to counter the prospect of a drop in price before buyers can be found. The overall effect of this process may be to keep the price at a higher level than it would otherwise be during the period of stabilisation. 

Suspension of Trading by a Securities Exchange 

Under certain trading conditions it may be difficult or impossible to liquidate a position. This may occur, for example, at times of rapid price movements if the price rises or falls in one trading session to such an extent that under the rules of the relevant exchange trading is suspended or restricted. Placing a stop-loss order will not necessarily limit your losses to the intended amounts, because market conditions may make it impossible to execute such an order at the stipulated price. 

Settlement Protections 

The settlement of a transaction is the responsibility of the nominated broker executing trades on behalf of investors. The Tokenise Stock Exchange is not responsible for protecting investors’ beneficial interests held by a broker either in terms of security tokens or cash deposits, and investors may not be protected you if another counterparty defaults on its obligations to settle a trade. 

Insolvency 

Any insolvency of Tokenise Stock Exchange, Tokenise Brokerage, or default, or that of any other brokers involved with your transaction, may lead to positions being liquidated or closed out without your consent. In such circumstances, we will seek to your nominated broker  with additional information as to the status of existing trade/trades as and when we obtain it.

 
Legal and Regulatory Changes

Changes to current legislation and regulations could affect the value of the Securities which could impact your profits or losses. The impact of such legal and regulatory changes can be material and unexpected.