🚀 Getting Started & Eligibility
🏢 ISSUER FAQ
Frequently Asked Questions for Companies Considering Tokenization
✅ SEC CATEGORY 1 COMPLIANT | Issuer-Sponsored Tokenized Securities pursuant to SEC Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets Joint Statement dated January 28, 2026
📋 ELIGIBILITY & REQUIREMENTS
Q: What types of companies can tokenize their shares on OTCM Protocol?
A: Any active legal entity with valid corporate standing and the ability to create a new preferred share class can tokenize under our SEC Category 1 compliant framework. This includes:
| Company Type |
Eligible |
Notes |
| 📈 OTC-listed companies |
✅ Yes |
Pink, OTCQB, OTCQX |
| 🌫️ Grey market companies |
✅ Yes |
Companies without broker-dealer quotations |
| 💤 Companies with illiquid securities |
✅ Yes |
Lost 15c2-11 eligibility |
| 📋 Ceased reporting companies |
✅ Yes |
Former SEC filers |
| 🚫 Never-filed entities |
✅ Yes |
With proper corporate standing |
| 🏛️ Private companies |
✅ Yes |
With proper corporate structure |
Requirements:
| Requirement |
Description |
| ✅ Board Authority |
Board resolution authorizing Series M creation and tokenization |
| 🏢 Valid Corporate Standing |
Active status with state of incorporation |
| 🔍 KYB Verification |
Know Your Business verification of entity and beneficial owners |
| 👥 Management KYC |
KYC verification of all officers and directors |
| 📋 Due Diligence |
Completion of issuer due diligence process |
| ⚖️ Legal Capacity |
Authority to create new preferred share class |
Q: Do we need to be SEC-registered or filing reports to participate?
A: No. Many companies on our platform have ceased SEC reporting or never filed. We work with companies in various regulatory states:
| Regulatory Status |
Eligible |
Category 1 Notes |
| 📊 Active SEC filers |
✅ Yes |
Full reporting companies welcome |
| 🌫️ Grey market (no quotations) |
✅ Yes |
Perfect candidates for liquidity restoration |
| 📋 Ceased reporting companies |
✅ Yes |
Common situation we address |
| 🚫 Never-filed entities |
✅ Yes |
Private companies can tokenize |
| 💤 Lost 15c2-11 eligibility |
✅ Yes |
Core use case for OTCM Protocol |
💡 Category 1 Benefit: SEC Category 1 framework provides regulatory clarity regardless of your current SEC filing status. Tokenization does NOT create new SEC filing obligations for the issuer.
Q: What are Series "M" Preferred Shares?
A: Series "M" is a special class of preferred stock created specifically for SEC Category 1 compliant tokenization:
Series "M" Share Characteristics
| Characteristic |
Specification |
Purpose |
| 📏 Total Shares |
Exactly 1,000,000,000 (1 billion) |
Fixed supply for tokenization |
| 🛡️ Immunity |
Protected from stock splits & corporate actions |
Maintains 1:1 backing |
| 🔄 Conversion Rights |
Convertible to common stock per Certificate of Designation |
Investor protection |
| 🏦 Custody |
Permanently deposited at Empire Stock Transfer |
SEC-registered custodian |
| 🔒 Redemption |
Irrevocable once tokenized |
Prevents manipulation |
Rights and Restrictions
| Attribute |
Status |
Rationale |
| 🗳️ Voting Rights |
❌ None |
Prevents control issues |
| 💰 Dividend Rights |
⚠️ Per Certificate of Designation |
Issuer determines |
| 🔄 Conversion Rights |
✅ Yes |
Convertible to common stock |
| 🛡️ Protective Conversion |
✅ Yes |
Auto-converts on adverse events |
| 🏢 Company Access |
❌ Cannot be reclaimed |
Permanent custody |
Certificate of Designation
The Certificate of Designation filed with the Wyoming Secretary of State defines:
| Term |
Description |
| 📜 Conversion Ratio |
Rate at which Series M converts to common stock |
| 🚨 Protective Triggers |
Events that trigger automatic conversion |
| 💰 Dividend Rights |
Whether and how dividends are paid |
| 🏛️ Liquidation Preference |
Rights in event of liquidation |
| 📋 Other Terms |
Additional terms as determined by issuer |
Q: How much does it cost our company to tokenize?
A: The primary costs are your mandatory liquidity investment and legal fees:
Mandatory Liquidity Investment
| Liquidity Contribution |
Tokens Purchased |
Price per Token |
Total Investment |
| 40% (minimum) |
400,000,000 |
$0.00001 |
$4,000 |
| 50% |
500,000,000 |
$0.00001 |
$5,000 |
| 60% (maximum) |
600,000,000 |
$0.00001 |
$6,000 |
Additional Costs
| Cost Type |
Amount |
Notes |
| 🚫 Platform Fees |
None upfront |
No platform onboarding fees |
| ⚖️ Legal Fees |
Varies |
Certificate of Designation, board resolutions |
| 🏛️ State Filing Fees |
~$100-500 |
Wyoming Secretary of State filing |
| 🏦 Custody Setup |
Included |
Empire Stock Transfer coordination |
| 💰 Transaction Fees |
5% |
On secondary market trades (paid by traders) |
Vesting Schedule for Issuer Tokens
| Allocation |
Vesting |
Notes |
| 20% |
Free immediately |
Available at token creation |
| 20% |
At $75K graduation |
When token graduates to Raydium |
| 20% |
6 months post-graduation |
Cliff vesting |
| 20% |
12 months post-graduation |
Cliff vesting |
| 20% |
18 months post-graduation |
Cliff vesting |
💡 Note: Your mandatory 40-60% purchase goes into the liquidity pool to provide immediate trading availability for ST22 token holders.
⚙️ THE TOKENIZATION PROCESS
Q: What's the timeline for tokenization from start to finish?
A: Typically 4-6 weeks for SEC Category 1 compliant tokenization:
| Week |
Phase |
Activities |
| 1-2 |
📋 Due Diligence |
Documentation review, KYB verification, management KYC |
| 2-3 |
⚖️ Board Resolution |
Series M authorization, tokenization approval |
| 3-4 |
🏛️ State Filing |
Certificate of Designation with Wyoming Secretary of State |
| 4-5 |
🤝 Agreement Execution |
Tripartite Agreement, custody arrangements |
| 5-6 |
🪙 Launch |
Share deposit, token minting, CEDEX listing |
Detailed Process Steps
| Step |
Action |
Responsible Party |
| 1 |
Submit application and documentation |
Issuer |
| 2 |
KYB verification and management KYC |
OTCM Protocol |
| 3 |
Due diligence review |
OTCM Protocol |
| 4 |
Board resolution for Series M |
Issuer |
| 5 |
Draft Certificate of Designation |
Legal counsel |
| 6 |
File Certificate with Wyoming SOS |
Issuer |
| 7 |
Execute Tripartite Agreement |
All parties |
| 8 |
CUSIP assignment |
CUSIP Global Services |
| 9 |
Deposit shares with Empire Stock Transfer |
Issuer |
| 10 |
Verify custody and mint tokens |
OTCM Protocol |
| 11 |
Mandatory liquidity purchase |
Issuer |
| 12 |
CEDEX listing and trading begins |
OTCM Protocol |
Q: Can we reclaim our Series "M" shares after depositing them?
A: Absolutely not. Once deposited with Empire Stock Transfer, shares are permanently locked and irrevocable.
Why Permanence Is Essential
| Reason |
Benefit |
| 🤝 Token Holder Confidence |
Investors know backing cannot be removed |
| 🛡️ Manipulation Prevention |
Company cannot pump and dump |
| 💎 Permanent Backing Guarantee |
1:1 backing maintained forever |
| ⚖️ Category 1 Compliance |
SEC framework requires true equity backing |
| 🏦 Custody Integrity |
Empire Stock Transfer enforces permanence |
Enforcement Mechanisms
| Mechanism |
Description |
| 📜 Legal Agreements |
Tripartite Agreement prohibits withdrawal |
| 🏦 Custody Protocols |
Empire Stock Transfer rejects all withdrawal requests |
| 🔗 Smart Contract |
Company wallets blacklisted from redemption |
| 🛡️ Transfer Hooks |
Enforce custody verification on every transaction |
| ⚖️ Penalty Clauses |
Severe penalties for any violation attempts |
Q: Do we need shareholder approval for tokenization?
A: Depends on your corporate bylaws and state law. Generally:
| Situation |
Requirement |
| ✅ Most Cases |
Board approval only for new preferred share class |
| 📋 Check Bylaws |
Some bylaws require shareholder vote for new share classes |
| 🏛️ State Law |
State of incorporation may have specific requirements |
| 🔍 Due Diligence |
Our process will clarify your specific situation |
Typical Board Resolution Contents
| Element |
Description |
| 📜 Authorization |
Authorize creation of Series M Preferred Shares |
| 📊 Terms |
Approve Certificate of Designation terms |
| 🪙 Tokenization |
Authorize tokenization on OTCM Protocol |
| 🏦 Custody |
Authorize deposit with Empire Stock Transfer |
| ✍️ Signatories |
Designate authorized signers for agreements |
Q: What happens to our existing common shareholders?
A: Nothing changes for existing shareholders:
| Factor |
Impact |
| 🚫 No Dilution |
Series M is newly created, not carved from existing shares |
| 📊 Cap Table |
Traditional cap table unaffected |
| 📈 Common Stock |
Existing common shareholders retain all rights |
| 🔄 Separation |
Tokenization is completely separate from common stock |
| 💰 Value |
Potential positive impact from increased liquidity/visibility |
How It Works
Before Tokenization:
├── Common Stock: [Existing shareholders unchanged]
└── Preferred Stock: [Any existing classes unchanged]
After Tokenization:
├── Common Stock: [Existing shareholders unchanged]
├── Preferred Stock: [Any existing classes unchanged]
└── Series M Preferred: [NEW - 1 billion shares for tokenization]
└── Deposited with Empire Stock Transfer
└── Tokenized as ST22 tokens
📋 COMPANY OBLIGATIONS & RESTRICTIONS
Q: Can our company redeem tokens to get back our Series "M" shares?
A: Never. Companies are permanently prohibited from redemption:
Prohibited Actions
| Action |
Status |
Enforcement |
| 🔄 Redeem Tokens |
❌ Prohibited |
Smart contract rejection |
| 🏦 Withdraw Shares |
❌ Prohibited |
Empire Stock Transfer rejection |
| 🔐 Access Custody Account |
❌ Prohibited |
Custody protocols |
| ✏️ Modify Share Terms |
❌ Prohibited |
Certificate of Designation is filed |
| 🔥 Burn Tokens |
❌ Prohibited |
Smart contract restriction |
Enforcement Mechanisms
| Mechanism |
How It Works |
| 🖤 Wallet Blacklist |
All company wallets blacklisted from redemption |
| 🏦 Custody Rejection |
Empire Stock Transfer rejects all issuer withdrawal requests |
| 📜 Legal Penalties |
Severe penalty clauses in Tripartite Agreement |
| 🔗 Smart Contract |
Automatic rejection of prohibited transactions |
| 📢 Public Disclosure |
Any violation attempts publicly exposed |
Q: Can we buy our own tokens on the secondary market?
A: Yes, but with significant restrictions:
Permitted Actions
| Action |
Permitted |
Notes |
| ✅ Purchase additional tokens |
Yes |
After mandatory initial buy |
| ✅ Hold tokens |
Yes |
In company treasury |
| ✅ Use for incentives |
Yes |
Employee compensation, partnerships |
| ✅ Sell on market |
Yes |
Subject to vesting schedule |
Prohibited Actions
| Action |
Prohibited |
Enforcement |
| 🚫 Redeem for shares |
Yes |
Smart contract rejection |
| 🚫 Burn to reduce supply |
Yes |
Smart contract restriction |
| 🚫 Manipulate price |
Yes |
Circuit breakers + legal |
| 🚫 Insider trading |
Yes |
Securities law applies |
⚠️ Securities Law Reminder: ST22 Tokenized Securities are securities under federal securities laws. All company trading must comply with insider trading prohibitions and other applicable securities laws.
Q: What's our mandatory liquidity investment requirement?
A: Must invest in 40-60% of tokens immediately upon creation:
Mandatory Purchase Specifications
| Specification |
Requirement |
| 📊 Percentage |
40-60% (company chooses exact amount) |
| ⏰ Timing |
Within 4 hours of token minting |
| 💵 Pre-Funding |
Required before share acceptance |
| 🎯 Purpose |
Demonstrates commitment + provides liquidity |
Example Calculation
| Element |
Value |
| 🪙 Tokens Purchased |
500,000,000 (50%) |
| 💰 Price per Token |
$0.00001 |
| 💵 Total Investment |
$5,000 |
| 💧 Result |
Instant trading liquidity available |
Where Your Investment Goes
| Allocation |
Percentage |
Purpose |
| 💧 Liquidity Pool |
40% of your purchase |
Provides trading liquidity |
| 🔒 Vested Holdings |
60% of your purchase |
Released per vesting schedule |
Q: Do we have ongoing obligations after tokenization?
A: Minimal mandatory obligations, but recommended activities:
Mandatory Obligations
| Obligation |
Requirement |
Frequency |
| 🏢 Maintain Corporate Standing |
Keep company in good standing |
Ongoing |
| 📋 Honor Certificate Terms |
Comply with Certificate of Designation |
Ongoing |
| 🛡️ Protective Conversion |
Honor conversion triggers if activated |
As triggered |
| ⚖️ Securities Compliance |
Comply with applicable securities laws |
Ongoing |
Recommended Activities (Not Mandatory)
| Activity |
Benefit |
| 💬 Community Engagement |
Builds token holder confidence |
| 📢 Business Updates |
Voluntary updates on company progress |
| 🗣️ Token Holder Communication |
Participate in discussions |
| 🏃♂️ Business Operations |
Continue normal business activities |
💡 Important: Tokenization does NOT create new SEC filing or reporting obligations for the issuer. Your existing regulatory status remains unchanged.
💰 FINANCIAL & LEGAL CONSIDERATIONS
Q: How does tokenization affect our taxes?
A: Consult your tax advisor, but generally:
| Event |
Typical Tax Treatment |
Notes |
| 📜 Creating Series M |
Typically non-taxable |
Corporate restructuring |
| 💵 Initial token purchase |
Capital investment |
Business expense consideration |
| 📈 Token sales |
Capital gains/losses |
Based on holding period |
| 💰 Fee payments |
Deductible expense |
Business operations |
| 🔄 Token-for-services |
Fair market value |
Employee compensation rules |
⚠️ Disclaimer: This is general information only. Consult a qualified tax advisor for your specific situation.
Q: What if we go bankrupt or face SEC enforcement?
A: Protective conversion triggers automatically to protect ST22 token holders:
Protective Conversion Trigger Events
| Trigger Event |
Action |
Timing |
| 💸 Bankruptcy Filing |
Series M converts to common stock |
Immediate upon filing |
| 🏛️ SEC Enforcement Action |
Series M converts to common stock |
Upon cease and desist, civil penalties, asset freeze |
| ⚖️ Criminal Proceedings |
Series M converts to common stock |
Upon indictment, conviction, or plea |
| 🚨 Material Adverse Event |
Series M converts to common stock |
Per Certificate of Designation |
| 🏦 Custody Breach |
Series M converts to common stock |
If custody integrity compromised |
How Protective Conversion Works
| Step |
Action |
| 1 |
Trigger event occurs |
| 2 |
Transfer Hooks detect trigger via oracle |
| 3 |
Automatic conversion initiated |
| 4 |
ST22 tokens convert to common stock representation |
| 5 |
Token holders can claim underlying common shares |
Token Holder Protection
| Protection |
Description |
| 🛡️ Conversion Rights |
Series M converts to common stock |
| ⚖️ Creditor Status |
Token holders become common shareholders with creditor claims |
| 📋 Asset Claims |
Can participate in bankruptcy proceedings |
| 🏛️ Legal Standing |
Full securities law protections apply |
💡 Important: Protective conversion is designed to give token holders the best possible position in adverse scenarios. However, conversion to common stock does NOT guarantee any recovery—the common stock may have little or no value.
🎖️ INVESTOR REQUIREMENTS
Q: Who can purchase our ST22 tokens?
A: ST22 Tokenized Securities are offered under Regulation D Rule 506(c), which requires:
Investor Requirements
| Requirement |
Description |
| 🎖️ Accredited Investor Status |
All purchasers must be verified accredited investors |
| 🪪 KYC Verification |
Full Know Your Customer verification required |
| 🚫 OFAC Screening |
Sanctions screening on every transaction |
| ✅ Verification |
Third-party accreditation verification (self-certification NOT sufficient) |
Accredited Investor Qualifications
| Qualification Method |
Criteria |
| 💰 Individual Income |
$200,000+ annually for past 2 years (or $300,000 joint with spouse) |
| 🏦 Net Worth |
$1,000,000+ excluding primary residence |
| 📜 Professional License |
Series 7, 65, or 82 license in good standing |
| 🏢 Entity |
$5,000,000+ in assets |
| 🏛️ Institutional |
Banks, broker-dealers, insurance companies, RIAs |
⚠️ Important: This is a benefit for your company—accredited investor requirements mean your token holders are sophisticated investors who understand investment risk.
Q: Why are accredited investor requirements a benefit?
A: Accredited investor requirements provide several advantages:
| Benefit |
Description |
| 🎖️ Sophisticated Investors |
Token holders understand investment risk |
| ⚖️ Regulatory Compliance |
Clear compliance with SEC requirements |
| 🏛️ Institutional Participation |
Enables institutional investors to participate |
| 🛡️ Reduced Liability |
Proper verification reduces issuer liability |
| 📊 Market Quality |
Higher quality investor base |
| 🚫 Reduced Complaints |
Sophisticated investors less likely to complain about volatility |
🏛️ CATEGORY 1 COMPLIANCE
Q: What is SEC Category 1 and why does it matter?
A: On January 28, 2026, the SEC issued guidance establishing a framework for tokenized securities:
Category 1: Issuer-Sponsored Tokenized Securities
| Requirement |
OTCM Implementation |
| 🏛️ Direct Issuer Authorization |
Board resolution required |
| 📝 Official Shareholder Register |
Certificate of Designation filed |
| 🏦 Regulated Custody |
Empire Stock Transfer (SEC-registered) |
| 💎 True Equity Backing |
1:1 Series M preferred shares |
| 🔗 Clear Ownership Chain |
CUSIP + Golden Medallion Guarantee |
| 🛡️ Investor Protection |
42 Transfer Hook controls |
| 📜 Token Standard Compliance |
SPL Token-2022 with Transfer Hooks |
Why Category 1 Matters for Issuers
| Benefit |
Description |
| ⚖️ Regulatory Clarity |
Clear SEC framework for tokenized securities |
| 🏛️ Institutional Legitimacy |
Operating within established securities law |
| 🛡️ Investor Confidence |
Token holders know they own real equity |
| 📋 Compliance Certainty |
Clear requirements to follow |
| 🔄 No New Obligations |
Tokenization doesn't create new SEC filing requirements |
Q: Are ST22 tokens securities?
A: Yes. ST22 Tokenized Securities are securities under federal securities laws. This is by design.
Why Securities Classification Is Good
| Benefit |
Description |
| ⚖️ Regulatory Clarity |
No ambiguity about regulatory status |
| 🛡️ Investor Protection |
Full securities law protections apply |
| 🏛️ Institutional Access |
Institutions can participate in compliant securities |
| 📊 Market Credibility |
Securities market legitimacy vs. "meme token" perception |
| 🎯 Target Market |
Attracts serious investors seeking liquidity |
💡 Core Principle: Rather than engineering around securities laws, OTCM Protocol operates within them—providing the regulatory clarity that enables institutional participation and long-term market sustainability.
📞 GETTING STARTED
Q: How do we begin the tokenization process?
A: Contact our Issuer Relations team to start:
Initial Steps
| Step |
Action |
| 1 |
Contact Issuer Relations — issuers@otcm.io |
| 2 |
Initial Consultation — Discuss your situation and goals |
| 3 |
Documentation Request — Receive list of required documents |
| 4 |
Submit Application — Complete issuer application |
| 5 |
Due Diligence — Begin KYB and management KYC process |
Required Documentation (Initial)
| Document |
Purpose |
| 📜 Articles of Incorporation |
Verify corporate formation |
| ✅ Certificate of Good Standing |
Verify active status |
| 📋 Bylaws |
Review governance structure |
| 📊 Cap Table |
Understand ownership structure |
| 👥 Officer/Director List |
Identify management for KYC |
| 🏢 Business Description |
Understand company operations |
| Field |
Value |
| 📄 Document Version |
3.0 |
| 📅 Last Updated |
January 2026 |
| 📍 Jurisdiction |
Wyoming, United States |
| 🏛️ Regulatory Framework |
SEC Category 1 (Issuer-Sponsored Tokenized Securities) |
⚠️ Disclaimers
| Disclaimer |
Description |
| 📋 Not Legal Advice |
This FAQ does not constitute legal or tax advice |
| 👨⚖️ Consult Professionals |
Consult qualified legal and tax advisors |
| 🔄 Subject to Change |
Information may be updated as regulations evolve |
| ⚖️ Securities Laws Apply |
ST22 Tokenized Securities are securities under federal law |
| 💸 Investment Risk |
Tokenization does not guarantee any financial outcome |
© 2026 OTCM Protocol, Inc. | All Rights Reserved
ST22 Tokenized Securities are securities under federal securities laws pursuant to SEC Category 1 (Issuer-Sponsored Tokenized Securities) framework. This document is for informational purposes only and does not constitute legal, tax, or investment advice.
