Smartlands Platform Appropriateness Test
January 17, 2019
Hopefully, you will see this guide before you rush off to the Smartlands website and start writing stuff and posting pictures (speaking of pictures, here’s Part One of our guide to passing KYC fast, make sure to look through it if you’re having trouble posting images of your ID).
IMPORTANT: please bear in mind that if you fail the appropriateness test, a 7-day lockdown period is applied due to regulatory requirements. After 7 days you’ll be able to retake the test.
Before passing KYC, you will be required to pass an appropriateness test, to see whether you understand what securities are, what you are investing in and the risks which are associated with your investment.
Let’s begin by reminding ourselves what a security token issued on Smartlands Platform is.
Security tokens issued on the Smartlands Platform are asset-backed, thus, they are considered securities and regulated by FCA. Security tokens are linked to real assets and embody a share of the value of an asset.
Smartlands Platform will provide a secondary market for all security tokens issued on the Platform. However, the Platform does not guarantee liquidity. Although we expect that security tokens issued on the Smartlands Platform will be actively traded, there will be no market maker, and there is a possibility that investors will not be able to exit their position quickly at a current market price. Selling off large stakes will likely take time and may result in a substantial price decrease.
Moreover, FCA has a very cautious view on liquid assets that mostly include state-issued debt securities and other comparable instruments. Thus, security tokens issued on the crowdfunding platform do not qualify as liquid assets and are deemed illiquid.
Illiquid investment typically has a significant asset-specific risk. Therefore, restricted investors (the least experienced investors) should diversify the risk and invest only a small fraction (not more than 10%) of their capital in illiquid assets.
Despite the fact that security tokens are backed by real estate, there is a risk of capital loss, and there is no guarantee that you will redeem your investment in full since real estate prices can change over time.
And finally, you must clearly understand all the essential details about the investment you make and risks associated with it. If you have not had any experience in investing in real estate or illiquid assets, you must perform additional research about your envisaged investment or seek financial advice.