Table of Contents
- Disclaimer & Risks
- Issuer Information
- KYC & AML
- Legal Team
- DCAP Corporation
- Tokenizing Real Estate Assets
- DCAP Ecosystem
- Sustainable Investment Vehicle
- DCAP Legal Framework
- Solving the 1031 Exchange Problem
- Figures and Flowcharts
Disclaimer & Risks
IMPORTANT INFORMATION: This communication is for information purposes only and is not, and under no circumstances is to be construed as, an invitation to make an investment in Decentralize Capital Allocation Protocol “DCAP.” Investing in DCAP Investment Products & Currency involves risks. The recovery of an initial investment is at risk, and the anticipated return on such an investment is based on many performance assumptions. The actual amount distributed will depend on numerous factors, including DCAP's financial performance, debt covenants and obligations, interest rates, working capital requirements and future capital requirements. In addition, the market value of DCAP, its investment products and currency may decline if DCAP is unable to meet its cash distribution targets in the future, and that decline may be material. It is important for an investor to consider the particular risk factors that may affect the industry in which it is investing and therefore the stability of the distributions that it receives. There can be no assurance that income tax laws and the treatment of mutual fund trusts will not be changed in a manner which adversely affects DCAP. PAST PERFORMANCE MAY NOT BE REPEATED. Investing in DCAP can involve significant risks and the value of an investment may go down as well as up. There is no guarantee of performance. An investment in DCAP is not intended as a complete investment program and should only be made after consultation with independent investment and tax advisors. Only investors who do not require immediate liquidity of their investment should consider a potential purchase of the DCAP token. The risks involved in this type of investment may be greater than those normally associated with other types of investments.
Risk of Hacking and Security Weakness
Hackers or other groups or organizations may attempt to interfere with DCAP in a number of ways, including, but not limited to denial of service attacks, Sybil attacks, spoofing, smurfing, malware attacks, or consensus-based attacks, and any such similar events which could have an impact on DCAP, the dcap.finance Platform and the Services the Company may offer from time to time.
Risk of Security weakness in the Smart Contract, Website and DCAP Source Code or any associates software and/or Infrastructure
There is a risk that the Smart Contract, Website, the dcap.finance Platform and DCAP may unintentionally include weaknesses or bugs in the source code interfering with the use of or causing the loss of DCAP; the source code of the Website is open and could be updated, amended, altered or modified from time to time. The Company is unable to foresee or guarantee the precise result of an update, amendment, alteration or modification. As a result, any update, amendment, alteration or modification could lead to an unexpected or unintended outcome that adversely affects DCAP and/or the Website. As a result, DCAP may be lost.
Risk of no Listing or low/no Liquidity
DCAP coins are intended to be used solely for the dcap.finance Platform and the Company will not support or otherwise facilitate any secondary trading on an exchange or the secondary market or the external valuation of DCAP, which are all beyond the scope and purpose of the dcap.finance Platform. This restricts the contemplated intended use of DCAP only to the dcap.finance Platform and could therefore create illiquidity risk with respect to DCAP that the Participant owns. Even though there are currently online services available which enable exchange of cryptographic tokens with other such tokens or even enable the exchange of cryptographic tokens for fiat money, there are no warranties and/or guarantees that DCAP will be made available for exchange with other cryptographic tokens and/or fiat money, and no guarantees are given whatsoever with regard to the capacity and/or volume of such exchange/s. It shall be explicitly cautioned that such exchange, if any, might be subject to poorly-understood regulatory oversight, and the Company does not give any warranties in regard to any exchange services providers. Users including the Participant, if applicable, might be exposed to fraud and failure affecting those exchanges. In any case, it is not the Company's aim to enable exchange of DCAP for other cryptographic tokens or for fiat currency and it shall therefore not commit to any endeavors to list DCAP on such exchanges or any secondary markets.
Risk of Malfunction in the Ethereum Network or any other Blockchain and of Competing Platforms
It is possible that DCAP tokens are interacting with malfunctions in an unfavorable way, including but not limited to one that results in the loss of DCAP or prevent their use on the dcap.finance Platform. It is possible that alternative platforms could be established that utilize the same open source code and protocol underlying the dcap.finance Platform and attempt to facilitate services that are materially similar to the dcap.finance Platform. The dcap.finance Platform may compete with these alternatives, which could negatively impact and dcap.finance Platform, including the utility of DCAP for use of the dcap.finance Platform.
Risk of Uninsured Losses
Unlike bank accounts or accounts at some other financial institutions, DCAP coins and tokens are uninsured unless the Participant specifically obtains private insurance to insure them. Thus, in the event of loss of DCAP or loss of DCAP's value, there is no public insurer, such as the Investor Compensation Scheme or private insurance arranged by the Company to offer recourse to the Participant.
Risk associated with uncertain Regulations and enforcement actions
The regulatory status of tokens in general, Initial Token or Coin Offerings, Private Placement Event and distributed ledger technology is unclear or unsettled in many jurisdictions. It is difficult to predict how or whether regulatory authorities may apply existing regulation with respect to such technology and its applications, including the dcap.finance Platform and the DCAP. It is likewise difficult to predict how or whether legislatures or regulatory agencies may implement regulatory actions or changes to law and regulation affecting distributed ledger technology and its applications, including the dcap.finance Platform and the tokens. Regulatory actions or changes to law and regulation could negatively impact DCAP and the dcap.finance Platform in various ways, including, but not limited to, a determination that the acquisition, holding and use or disposal and transfer of DCAP constitutes a regulated instrument that require registration or licensing of those instruments or some or all of the parties involved in the acquisition, contribution, sale and delivery thereof. The Company may cease operations or interrupt the Private Placement Event in a jurisdiction in the event that regulatory actions, or changes to law or regulation, make it illegal to operate in such jurisdiction, or commercially undesirable or no longer viable to obtain the necessary regulatory approval/s to operate in such jurisdiction or to provide the dcap.finance Platform.
Risk arising from Taxation
The tax characterization of DCAP is uncertain. The Participant must seek his own tax advice in connection with purchasing DCAP, which may result in adverse tax consequences to him, including withholding taxes, income taxes and tax reporting requirements.
Risk of insufficient interest in DCAP and the dcap.finance Platform
It is possible that DCAP and the dcap.finance Platform will no longer be used by a large number of individuals, companies and other entities or that there will be limited interest in the use of DCAP and the dcap.finance Platform. Such a lack of use or interest could negatively impact the development of the dcap. finance Platform and therefore the potential utility of DCAP.
Internet Transmission Risks
There are risks associated with using DCAP including, but not limited to, the failure of hardware, software, and Internet connections, or other technologies on which the dcap.finance Platform or the use of DCAP relies. Such failures may result in disruptions in communication, errors, distortions or delays when using DCAP and the dcap.finance Platform or the Website.
Risk of Dissolution of the Company
It is possible that, due to any number of reasons, including, but not limited to, a decrease in DCAP's utility, the failure of commercial relationships, or intellectual property ownership challenges, unfavorable market conditions and added compliance and regulatory obligations, the use of the dcap.finance Platform may no longer be viable to be offered or the Company may need to cease trading and be dissolved and liquidated.
Risk arising from Lack of Governance Rights
Since DCAP coins do not represent or confer any ownership right or stake, share or security or equivalent rights, intellectual property rights or any other form of participation relating to the Company, all decisions involving the Company will be made by Company at their sole discretion, including, but not limited to, decisions to transfer more DCAP for use, to sell or liquidate the Company. These decisions could adversely affect the utility of that the Participant holds.
Regulatory Risks and Market Risks
The Company and by operation of the dcap.finance Platform, are subject to a variety of domestic (USA) and/or EU and international laws, regulation and directives, including those with respect to privacy and data protection, consumer protection, data security, and others. These laws, regulations and directives, and the interpretation or application of these laws, regulations and directives, could change. In addition, new laws, regulations or directives affecting the Company, the dcap.finance Platform and DCAP could be enacted, which could impact the utility of DCAP and their use on the dcap.finance Platform. Additionally, the Participants are subject to industry specific laws and regulations or licensing requirements. If any of the Parties fails to comply with any of these licensing requirements or other applicable laws or regulations, or if such laws and regulations or licensing requirements become more stringent or are otherwise expanded, it could adversely impact DCAP and the dcap.finance Platform, including the DCAP's utility on the dcap.finance Platform. The Participant hereby accepts the risk that in some countries DCAP might be considered, now or in the future, a Security Token. In this case the Company gives no representations, warranties or guarantees that the Utility Tokens are not considered to be Security Tokens in all countries. The Participant hereby accepts to be solely responsible of the legal, financial and any other risks connected to DCAP as a security in his country and to be the only responsible to check if the holding, using and the disposal of DCAP is legal in your country. Also, changes in laws, regulations and directives governing the Company's operations may adversely affect their business and consequently the dcap. com Platform. Any change in the Company's tax status, or in taxation legislation in Malta or elsewhere, could affect the value of its financial holdings, its business and the Company's ability to achieve its business objective and continual commitment to the development of the dcap.finance Platform.
Other Inherent Risks
The Participant understands and accepts the inherent risks associated with DCAP, to the extent not covered elsewhere in the Terms, including, but not limited to, risks associated with (a) money laundering; (b) fraud; (c) exploitation for illegal purposes; and (d) any other unanticipated risks.
Cryptographic tokens such as DCAP as well as blockchain are a new and untested technology. In addition to the risks included in the DCAP Documents there are other risks associated with the Participant's acquisition, holding and use of DCAP , including some that the Company cannot or may not anticipate. Such risks may further materialize as unanticipated variations or combinations of the risks discussed in the DCAP Documents. The Participant hereby represents and warrants that he will take sole responsibility for any restrictions and risks associated with the holding or use of DCAP. If any of the risks, mentioned in the Terms are unacceptable or the Participant is not in the position to understand, the Participant should not acquire, hold or use DCAP.
A utility cryptographic decentralized token issued by the Company based on the Ethereum protocol (ERC20 token) being the token which can be used by participants to acquire DCAP Ecosystem Tokens. DCAP COIN IS NOT AN INVESTMENT VEHICLE. DCAP IS A CURRENCY MEANT TO BE UTILIZED TO FACILITATE LIQUIDITY THROUGHOUT THE ECOSYSTEM. AS THE PURCHASING POWER OF THE US DOLLAR IS A REPRESENTATION OF THE STRENGTH OF ITS ECONOMY, $DCAP, AND ITS VALUE, IS REPRESENTATIVE OF THE STRENGTH OF THE DCAP ECOSYSTEM. Contract Address:
***DO NOT SEND MONEY or TOKEN TO THE CONTRACT ADDRESS. SENDING MONEY OR TOKEN TO THE CONTRACT ADDRESS IS UNRECOVERABLE.
Symbol DCAPord - The ordinary token is a restricted security registered with the Security Exchange Commission under exemption Regulation D 506(b). In order to purchase the token, you must hold an Accredited Investor NFT. The OT receives a relfection on all buybacks within the ecosystem. As with all restricted securities in the US, you must hold the security for 1 year before selling it in the open market. All of our securities can only be sold within our network and must be sold to accredited investors.
A security cryptographic ownership token filed with the Security and Exchange Commission under Regulation D rule 506(c). The DCAP Preferred Token is created by the Company, issued by the Company and is pegged to the actual shares and ownership of DCAP, registered as, Decentralized Capital Allocation Protocol. DCAP Preferred Tokens grant holders voting rights to participate in the DCAP-DAO. The DAO participates in decision-making processes, feedback polls and surveys in regards to the operations of the ecosystem. Under SEC regulations, ALL participants and owners of the Preferred token are required to hold the asset for 1 year before selling it.
US Accredited Investor
At the initial launch of DCAP, we are launching 2 tokens and an NFT pool. DCAP coin is a currency, DCAP preferred token and the NFT Pool are both US restricted securities registered with the SEC under Reg D section 506(c) and Reg D section 506(b). To be an accredited investor you need to make 300K/year for the last 2 years and or have 1m in vested assets excluding your home, specifically excluding your primary residence. If the investor isn't an accredited investor then they invest into the NFT pool where we can have 35 non-accredited investors. Those are the only direct profit share opportunities.
Any person (natural or juridical), who has contributed and is bound by the terms of the private placement and this White Paper and/ or who intends to hold and/or use DCAP Ecosystem Token(s) at any moment in time and shall include any person who intends to become a Participant.
COMPANY NAME: DECENTRALIZED CAPITAL ALLOCATION PROTOCOL INC.
COMPANY ADDRESS: 651 N Broad St, Ste 205 #7991 Middletown, Delaware 19709
NAICS CODE: Finance and Insurance (52)
NAICS SUBCODE: Miscellaneous Intermediation (523910)
FORMATION STATE: Delaware
ENTITY TYPE: C-CORPORATION
FORMATION DATE: March 16, 2022
ENTITY ID (EIN): 88-1290479
KYC & AML
Know Your Customer (KYC) and Anti-Money Laundering (AML) & Counter Financing of Terrorism
The issuer has adopted rigorous KYC procedures to verify the identity of every applicant, and the beneficial owner (where applicable) that has expressed interest in acquiring DCAP and only those contributors which have successfully identified themselves in the KYC procedure, to the Issuer's satisfaction, have been successful in participating in the DCAP Private Placement. Strict compliance with KYC procedures protects the contributors and the Issuer from criminal elements such as money laundering activities and terrorism financing. The KYC procedures adopted were based on current market practices and in accordance with all applicable USA legislation The Issuer recognizes the importance of preventing money laundering and terrorism financing therefore AML and counterfinancing of terrorism procedures have been implemented in accordance with applicable legislation, notably the Prevention of Money Laundering Act, including any rules and regulations enacted thereunder. The Issuer particularly requested the identification of any politically exposed persons (“PEPs”), an individual who is or who has, been entrusted with prominent public functions, and immediate family members, or persons known to close associates of such persons. The policies and procedures implemented by the Issuer in this respect are based on contributor's identification and contributor's identity verification on the basis of the following sources: Documentation provided by the contributors. Information about the contributors obtained from reliable and independent sources. In particular, the Issuer has and shall not conduct business with the following risky persons: Those refusing to provide the Issuer with required information or documentation. Entities whose shareholder/control structure cannot be determined. Those individuals that are included on any official sanction lists. Individuals indicating possible involvement in criminal activities based on available information. Those individuals with business where activity, source of funds or source of wealth cannot be reasonably verified. An appropriate record of received documentation and information, copies or recommendations are retained by the Issuer for the legally established time period as per applicable laws, including AML legislation and data protection laws including General Data Protection Regulation.
IP Rights and Service providers Intellectual property rights associated with the offering, projects arising from it, and protection thereof: The DCAP and dcap.finance marks, all content on the DCAP website (www.dcap.finance) and this white paper in relation to the DCAP offering and the dcap.finance platform, unless mentioned otherwise, remain the intellectual property rights of the Issuer. This means that readers are not allowed to use the content contained in web pages, electronic or written publications or any other media and/or words, phrases, names, designs or logo that are our trademarks without our express written permission. All information provided on website, whitepaper, business model and any other public document, is subject to change without any notice to any person including any stakeholders or token holders.
DCAP's Attorney on record is Morrison Foerster. (https://www.mofo.com/)
Morrison & Foerster LLP (also known as MoFo) is an American multinational law firm headquartered in San Francisco, California, with 17 offices located throughout the United States, Asia, and Europe. The firm has over 1,000 lawyers who advise clients across a range of industries and practices, including intellectual property, patent litigation, corporate/M&A, business restructuring, and securities. As one of the largest firms in the world, represented SoftBank in Alibaba's U.S. IPO—the largest IPO in history.
Based in San Diego, California, Decentralized Capital Allocation Protocol “DCAP” is a decentralized finance company that invests in income producing business assets, including but not limited to: residential, corporate, industrial, and vacation properties, mortgage financing, corporate financing, corporate acquisitions, treasury bonds, gold, cd’s, company stocks, etc.
DCAP: The best of both worlds
The tokenization of real estate assets allows us to provide a unique experience where syndicate investors can be more liquid, attain higher returns, and receive more tax benefits through property depreciation. Concurrently, investors receive the benefits of holding equity in one of the first real estate companies built on blockchain.
Bringing stability to cryptocurrency through sustainable returns from cash flow assets, backed by property acquisitions.
Transforming the way people invest in real estate through blockchain technology.
- Jared Lutz, CEO
- Jay Scheinok, President
- Matthew Blanco, Creative Director
- Pat Cassidy, Media Director
- Jonathan van de Groep, Head of Web Development
- Chris Bearss, Business Development
Board of Directors
- Jared Lutz, Chairman, CEO
- Jay Scheinok, Vice Chairman, President, & Treasury
- Matthew Blanco, Secretary
- Keith Lutz, Vice President of Information Technology, Druva
- Kyle Evans, Manager - Annuity Internal Sales at Brighthouse Financial
- Pat Cassidy, Partner (DCAP), Hardfactor Co-host
Board of Advisors
- Michael Pettinato, CPA, MST, Tax Manager at Sorrento Therapeutics, Inc.
- Benjamin Mayot, Head of Marketing at BIKE SHED MOTORCYCLE CLUB
Corporate Flowchart - See Figure 1 Corporate Oversight
Tokenizing Real Estate Assets
What is asset tokenization?
Asset tokenization is the process by which ownership is fractionalized and recorded on a distributed ledger (blockchain).
Why would someone tokenize real estate assets?
Tokenizing real estate assets allows a pool of investors or individuals to acquire property and share ownership in a decentralized framework. Decentralization of real estate assets provides an unprecedented level of transparency. All payments to the syndicate and amongst all members of the syndicate are recorded on a decentralized distributed ledger (blockchain) and cannot be manipulated or altered. Tokenization allows for a trustless system between investors that often do not know one another.
How is DCAP revolutionizing the Real Estate Market?
DCAP is bringing DeFi, decentralized finance, to the traditional real estate syndicated market. By leveraging cryptocurrency, DCAP is able to introduce solutions not yet found in the market. Benefits include but are not limited to:
- Transaction transparency
- Real estate currency
- Lower barrier of entry
- Larger investor base
- Cash flow liquidity
- Passive income
- Diversified investments
- Seamless 1031 exchange
- Lower hold periods
- Higher cash flow payouts
- Higher depreciation tax benefits
The DCAP Ecosystem was designed to thrive and be supported by a growing portfolio of properties and cash flow assets. A token backed by property acquisition with cash flow allows investors to be introduced to cryptocurrency without the fear of significant financial loss. The ecosystem from an outsider's perspective may seem complicated but it's actually rather simplistic. DCAP, through its subsidiaries, purchases cash flowing real estate properties. The net cash flow is then used for buy-backs. The token purchased is then distributed to qualified investors, very similar to a dividend. More cash flow, higher returns. This is done through a series of funds, and tokens that are designed to be in compliance with the Security and Exchange Commission.
DCAP operates a mult-layer tokenomic ecosystem that allows the company to function in a stable environment, while protecting and backing investments with hard assets.
Layer 1 (L1)
Our first layer is the $DCAP currency. Unlike most cryptocurrency projects and companies, $DCAP is not distributed for free to any single person or entity other than itself. Delivering or “airdropping” token to team members, advisors, and/or partners opens up unnecessary risk to the liquidity of the token, and as such was eliminated from our operating model.
The initial supply of token is allocated to liquidity, pre-sale, and the DCAP NFT Pool. It's important to note that Layer 1 operates solely on the $DCAP token, which is our ecosystem currency. In an effort to comply with our understanding of regulations set forth by the SEC, funding the liquidity pool with a public presale from unknown investors would revoke the DCAP currency status and the event would be classified as a security. In the subsequent layers we will discuss DCAP security tokens.
The general purpose and identity of the $DCAP token is to provide liquidity for the entire ecosystem. All net cash flow is driven to only the $DCAP token.
10% Transaction Fee:
When buying and selling DCAP, the smart contract initiates a 10% transaction fee. That fee is converted to stable token and sent to our Capital Allocation Protocol, which is controlled by the Board of Directors, and then eventually the DCAP-DAO.
Revenue, Buybacks and Cash Flow:
Our acquisitions, such as real estate rental properties, generate revenue. That revenue then re-enters the DCAP token ecosystem through our TAP, our Token Allocation Protocol.
Layer 2 (L2)
Our second layer is where all redistributions, and profit-sharing take place. In accordance with SEC regulations only accredited investors or non-accredited investors that qualified with an exemption, are allowed in the second layer. In order to receive redistributions of DCAP cash flow income, you must hold the layer 2 token.
The ordinary token is a restricted security registered with the Security Exchange Commission under exemption Regulation D 506(b). In order to purchase the token, you must hold an Accredited Investor NFT. The OT receives a reflection on all buybacks within the ecosystem. As with all restricted securities in the US, you must hold the security for 1 year before selling it in the open market. All of our securities can only be sold within our network and must be sold to accredited investors.
Redistributions are proportional to the amount of token held by the investor to the amount of token in circulation within the ecosystem.
E.g. L2 has a total supply of 20 million token, however, only 10 million token is circulating within the ecosystem. Investor A owns 1 million token, which is 5% of the total supply but is 10% of the circulating supply within the ecosystem. If 100,000 Ordinary Token is purchased from cash flow then Investor A would receive 10,000 token as they own 10% of the ecosystem circulating supply.
DCAP Token Minted Supply: 52,000,000
Liquidity - 67.30%
- Ordinary Token - 10,000,000
- Preferred Token - 20,000,000
- Uniswap - 5,000,000
- NFT Pool - 11.54%
- Seed Round - 21.16%
Ordinary Token (OT) Minted Supply: 21,000,000
- Liquidity - 100%
Preferred Token (Corporate Shares)(PT) Minted Supply: 10,000,000 PT
- Liquidity (Capital Raise) - 24%
- Executive Management - 61%
- Board Members - 10%
- Employee Equity Plans - 5%
Token Allocation Protocol
Our TAP, Token Allocation Protocol, is a smart contract that distributes DCAP profits throughout the ecosystem.
- $DCAP Transaction Fee Funds Acquisitions and Operations
- Acquisitions Funds $DCAP Liquidity
- Acquisitions Buybacks $DCAP Token
- Acquisitions Fund Ecosystem Token
- Security Token Profit-Share
Sustainable Investment Vehicle
Long-term vision - Tokenizing most of the syndicate marketplace
Building the Decentralized Capital Allocation Protocol was a moment that presented itself at a pivotal time in history. With the global financial markets on the brink of mass adoption into blockchain, DCAP is able to offer a unique opportunity to bridge traditional investors into cryptocurrencies for the first time. Real estate provides investment security, reliable cash flow, and a natural hedge against inflation. Backing the tokenized assets ensures financial security and perpetual cash flow for the corporation and investors.
As we build out this ecosystem, we will solve significant issues that investors face. We will nearly eliminate all sponsor's fees, delivering proportionately higher returns and more depreciation to all investors. We will operate every real estate syndicate through a DAO, allowing investors to take a more engaged approach on decisions being made on the property. Within three years investors will be able to seamlessly operate a 1031 exchange. Our network of acquisitions will allow investors to see active properties they can enter with a 1031 exchange. This will significantly eliminate the risk of finding the right deal, as these properties would have already started cash flowing. From transparency on the transaction, to more favorable terms, to 1031 exchange, market liquidity, shorter hold periods, and more depreciation increasing investor tax benefits, DCAP is the future of the real estate syndication market.
Dual-Liquidity and the importance of stabilizing $DCAP
The $DCAP token provides liquidity to the entire ecosystem. As such, ensuring its stability is paramount to the success of the corporation. In cryptocurrency we don't often see digital assets backed by anything other than community support. Dual-liquidity and the tokenization of real estate assets allows investors to be introduced to cryptocurrency without the fear of significant financial loss. This is the cornerstone of DCAP's business model.
Dual Liquidity ($DCAP Liquidity Pool):
100% of all trade activity, minus the transaction fee, are held in a decentralized liquidity pool. Every dollar that is traded for DCAP remains locked in this liquidity pool.
DCAP's cash flow from its properties enter the ecosystem through buybacks. In short, the cash-flow purchases the $DCAPtoken on market, and then redistributes the token proportionally throughout the ecosystem. When DCAP does this, it is essentially depositing cash into the liquidity pool and sending all its ecosystem the token they need to withdraw at their convenience.
40% of all the cash that enters the ecosystem is held in escrow until secondary is equal or greater than the liquidity pool.
E.g. The liquidity pool that stores traders funds equals $1,000,000. 40% of the cash-flow will continue to be deposition into the secondary escrow account until it reach $1,000,000 or greater.
Last Resort Insurance:
If the liquidity pool has a run on the token, and the secondary pool is drained, the Board of Directors will enact safety measures to begin offloading its property holdings to ensure it can meet its fiduciary obligations to its investors.
DCAP Legal Framework
From its inception DCAP leadership has put legal framework and regulation at the forefront of the corporation. Below are a series of SEC exemptions that DCAP uses to stay in compliance with the Securities and Exchange Commission.
Reg D Rule 506(b)
Rule 506(b) of Regulation D is considered a “safe harbor” under Section 4(a)(2). It provides objective standards that a company can rely on to meet the requirements of the Section 4(a)(2) exemption. Companies conducting an offering under Rule 506(b) can raise an unlimited amount of money and can sell securities to an unlimited number of accredited investors. An offering under Rule 506(b), however, is subject to the following requirements: no general solicitation or advertising to market the securities securities may not be sold to more than 35 non-accredited investors (all non-accredited investors, either alone or with a purchaser representative, must meet the legal standard of having sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the prospective investment) If non-accredited investors are participating in the offering, the company conducting the offering: must give any non-accredited investors disclosure documents that generally contain the same type of information as provided in Regulation A offerings (the company is not required to provide specified disclosure documents to accredited investors, but, if it does provide information to accredited investors, it must also make this information available to the non-accredited investors as well) must give any non-accredited investors financial statement information specified in Rule 506 and should be available to answer questions from prospective purchasers who are non-accredited investors Purchasers in a Rule 506(b) offering receive "restricted securities." A company is required to file a notice with the Commission on Form D within 15 days after the first sale of securities in the offering. Although the Securities Act provides a federal preemption from state registration and qualification under Rule 506(b), the states still have authority to require notice filings and collect state fees.
Rule 506(b) offerings are subject to "bad actor" disqualification provisions.
Reg D Rule 506(c)
Rule 506(c) permits issuers to broadly solicit and generally advertise an offering, provided that: all purchasers in the offering are accredited investors the issuer takes reasonable steps to verify purchasers' accredited investor status certain other conditions in Regulation D are satisfied Purchasers in a Rule 506(c) offering receive “restricted securities.” A company is required to file a notice with the Commission on Form D within 15 days after the first sale of securities in the offering. Although the Securities Act provides a federal preemption from state registration and qualification under Rule 506(c), the states still have authority to require notice filings and collect state fees.
Rule 506(c) offerings are subject to “bad actor” disqualification provisions.
The Commission adopted Regulation S to enhance access to offshore securities markets for both foreign and domestic issuers. Regulation S provides a safe harbor from the registration requirements of the Securities Act for offshore offers and sales of securities. Regulation S provides an SEC-compliant way for U.S. and international (Non-U.S.) companies to raise capital in and outside the U.S. It is unnecessary to have a company in the United States of America use Regulation S. A Regulation S offering can issue equity or debt securities.
Solving the 1031 Exchange Problem
In real estate, a 1031 exchange is a swap of one investment property for another that allows capital gains taxes to be deferred. There are very specific time frames that make it difficult for investors to responsibly reinvest in another property. Due to DCAP's model, 1031's are relatively seamless and are more accommodating to investors. Each property DCAP acquires through their subsidiaries automatically allocates 17.5% of the property for 1031 exchanges. Each property is fractionalized which enables investors to come into a deal even after it has closed.
E.g. Investor A sells an investment property for $1,000,000. In order to properly execute a 1031 exchange to defer taxes, Investor A must purchase or reinvest the entire $1,000,000 within 45 days. Investor A can simply enter the DCAP ecosystem and review the properties that are currently cash flowing, and they can spread the $1,000,000 across the entire ecosystem, not just 1 property or 1 investment syndicate. This allows investors to diversify their funds across multiple syndications and investment properties.
What is Section 1031?
Broadly stated, a 1031 exchange is a swap of one investment property for another. Most swaps are taxable as sales, although if yours meets the requirements of 1031, then you'll either have no tax or limited tax due at the time of the exchange.
1031 Exchange Timelines and Rules:
There are two key timing rules that you must observe in a delayed exchange.
The first relates to the designation of a replacement property. Once the sale of your property occurs, the intermediary will receive the cash. You can't receive the cash, or it will spoil the 1031 treatment. Also, within 45 days of the sale of your property, you must designate the replacement property in writing to the intermediary, specifying the property that you want to acquire. The IRS says you can designate three properties as long as you eventually close on one of them. You can even designate more than three if they fall within certain valuation tests.
The second timing rule in a delayed exchange relates to closing. You must close on the new property within 180 days of the sale of the old property. The two time periods run concurrently, which means that you start counting when the sale of your property closes. For example, if you designate a replacement property exactly 45 days later, you'll have just 135 days left to close on it.