1. PURPOSE
These Rules establish minimum requirements for identifying, disclosing and communicating risks of investing in securities admitted to the International Digital Securities Exchange (IDSX). Investors must receive clear, balanced and sufficiently prominent information about material investment risks before participating in the IDSX market. These Rules form part of the IDSX Market Rules and must be read with other applicable IDSX rules, policies, disclosure requirements and laws. Nothing in these Rules is investment, legal, tax or financial advice.
2. SCOPE
These Rules apply to: (a) Issuers whose securities are or may be admitted to IDSX; (b) Brokers providing market access; (c) Sponsors assisting admission; (d) Underwriters distributing securities; (e) Market Makers in IDSX securities; (f) other relevant Market Participants; and (g) investors accessing IDSX-traded securities. Additional or higher requirements under applicable law apply in addition to these Rules.
3. GENERAL PRINCIPLES OF RISK DISCLOSURE
Risk disclosures must be clear, accurate and understandable; appropriate for the intended investor; prominent and not obscured by promotion; balanced and not disproportionately focused on potential returns; based on reasonably available information; updated when material change makes them materially inaccurate, incomplete or misleading; and consistent with applicable law and IDSX Market Rules. No person may call an investment safe, guaranteed or risk-free, or use similar words, without a reasonable and legally supportable basis.
4. GENERAL INVESTMENT RISK
Investment in securities involves risk. A security's value can rise or fall and an investor may lose some or all invested capital. Past performance does not guarantee future performance. IDSX does not guarantee security value, Issuer performance, buyers or sellers, minimum liquidity, dividends or distributions, sale at a particular price or time, or recovery of the original investment.
5. EARLY-STAGE AND SME ISSUER RISK
IDSX facilitates capital-market access for SMEs and growth-stage companies, which may carry materially greater risk than larger or established businesses. Risks include limited operating history or financial resources; reliance on few customers, suppliers or key staff; sensitivity to economic or industry conditions; limited access to new capital; rapidly changing models; greater operational and execution risk; limited historic financial information; concentrated ownership or control; and greater business-failure risk. Investors should independently assess each Issuer's financial condition, business model, management, ownership and risk factors.
6. MARKET PRICE RISK
IDSX security prices may fluctuate significantly due to Issuer performance, expectations, economic or industry conditions, regulation, interest or exchange rates, significant shareholder transactions, liquidity, geopolitical events or sentiment. Trading price may materially differ from underlying asset value, financial position, prior valuation, issue price or other valuation measures.
7. LIQUIDITY RISK
Some securities may trade infrequently; investors must not assume an active secondary market. Limited liquidity may make a sale difficult, widen bid-ask spreads, cause large price moves from small orders, lead to partial execution, prevent execution at the expected price, or prevent exit within the desired period. A Market Maker does not guarantee continuous liquidity or execution at a particular price.
8. MARKET MAKER RISK
Market Makers may quote bids and offers under IDSX rules, but act independently; quotations can change with conditions; spreads may widen during volatility or low liquidity; and quotations may temporarily be unavailable where IDSX rules permit. Market Maker participation does not guarantee liquidity, price stability or investment value.
9. ISSUER AND BUSINESS RISK
Security value depends substantially on the Issuer's performance and financial condition. Revenue may fall, losses or expenses may rise, key customers may be lost, financing may become difficult, and litigation, regulation, technology disruption, management change, insolvency or other material events may harm the business. In insolvency or liquidation, shareholders may rank behind creditors and receive little or no value.
10. DIVIDEND AND DISTRIBUTION RISK
Equity ownership does not guarantee dividends. An Issuer may not declare dividends, retain earnings, lack distributable profits, be legally restricted, or suspend or reduce distributions. Investors should not acquire securities solely expecting dividends.
11. DILUTION RISK
Issuers may issue more securities after admission. New issues may dilute an investor's ownership percentage, voting rights, economic interest or entitlement to future distributions. Issuers must follow IDSX rules and law on new securities and shareholder rights.
12. CROSS-BORDER INVESTMENT RISK
Issuers and investors may come from different jurisdictions. Cross-border investment may involve differing company and securities laws, accounting standards, foreign or withholding taxes, currency changes, international payment restrictions, capital controls, difficulty enforcing rights abroad and different shareholder protections. Investors are responsible for understanding applicable legal and tax consequences.
13. CURRENCY AND SETTLEMENT RISK
Where a security's economic value, settlement asset or distribution currency differs from an investor's base currency, exchange-rate changes may increase or reduce returns. Multiple approved settlement methods or assets may add risks related to their characteristics. IDSX does not guarantee the value, convertibility or availability of a settlement asset unless expressly stated.
14. DIGITAL SECURITIES AND DISTRIBUTED LEDGER RISK
Some securities may use distributed-ledger technology, creating risks that differ from conventional infrastructure: network disruption, processing delays, software defects, smart-contract vulnerabilities, congestion, volatile transaction fees, protocol changes, validator or infrastructure failures, cybersecurity incidents, system incompatibility and changing law or regulatory treatment. Digital representation does not remove economic, legal or financial risks of the underlying security.
15. WALLET RISK
Use of an approved blockchain wallet for Digital Securities may involve lost credentials, compromised private keys, unauthorised access, phishing or cyberattack, incorrect addresses, software failure or incompatibility with supported networks. IDSX Wallet & On-Chain Transfer Rules may impose wallet eligibility, identity checks, whitelisting and transfer limits.
16. RESTRICTED TRANSFER RISK
IDSX Digital Securities may not be freely transferable to any blockchain address and may be limited to eligible or approved wallets. Transfers may be rejected, blocked, suspended or restricted if verification is incomplete, the investor is ineligible, law would be breached, sanctions or AML/CFT apply, the security has a transfer restriction or suspension, or IDSX or an authorised person must restrict it. Digital Securities are not necessarily transferable like unrestricted crypto-assets.
17. CYBERSECURITY RISK
Electronic trading and digital-securities infrastructure may face hacking, malware, denial-of-service, credential theft, data breaches, infrastructure compromise and attacks on third-party providers. IDSX and Participants are expected to maintain appropriate controls, but no technology can eliminate every cybersecurity risk.
18. TECHNOLOGY AND SYSTEM AVAILABILITY RISK
Trading systems, blockchain, communications networks and other technology may be interrupted or fail, delaying orders, executions or settlement; preventing trading or transfers temporarily; delaying or distorting market information; or causing trading suspension. IDSX may suspend or restrict trading to protect integrity and maintain a fair and orderly market.
19. SMART CONTRACT RISK
Software used for transfer restrictions, corporate actions, settlement or other Digital Securities functions may contain errors or interact unexpectedly. IDSX may require technical review, testing, security controls or approval. Review does not guarantee that a contract is free of defects or vulnerabilities.
20. REGULATORY RISK
Legal and regulatory frameworks for digital securities and distributed ledgers continue to evolve. Changes in law, regulation, interpretation or supervision may affect issuance, holding, trading, custody, settlement, blockchain infrastructure, cross-border access or continued IDSX admission. IDSX may modify rules, systems or operations as reasonably necessary for regulatory compliance.
21. TRADING SUSPENSION RISK
IDSX may suspend a security under its Trading Suspension & Resumption Rules. Investors may then be unable to buy or sell. Reasons may include undisclosed material information, regulatory concerns, disorder, unusual activity, Issuer non-compliance, technical problems, corporate actions or other market-integrity concerns. Resumption within any particular period is not guaranteed.
22. DELISTING RISK
A security may cease to trade on IDSX voluntarily or following regulatory action, failure to meet continuing listing requirements, insolvency, restructuring or enforcement. Sale or transfer may then be significantly harder. Delisting does not necessarily extinguish underlying legal ownership, but available trading or transfer mechanisms may materially change.
23. INFORMATION AND DISCLOSURE RISK
Investment decisions may rely on Issuer or third-party information. IDSX may impose disclosure and supervision requirements but cannot guarantee every statement, estimate or forecast will prove accurate. Investors should consider audited or reviewed financial information, announcements, material risk disclosures, ownership, related-party transactions, governance and other relevant information, and should not rely solely on promotional or social-media statements.
24. FORWARD-LOOKING INFORMATION
Forecasts, projections, targets and other forward-looking statements rely on assumptions and uncertainty. Actual results may differ materially. Such information is not a guarantee of future performance.
25. BROKER OBLIGATIONS
A Broker providing IDSX access must take reasonable steps to ensure investors receive applicable risk disclosures before trading. It must provide or make them available; explain material risks where law requires; meet eligibility and suitability duties; keep appropriate acknowledgement records; avoid misleading statements about IDSX securities; and provide home-jurisdiction disclosures. Where IDSX requires, the Broker must obtain confirmation of receipt and acknowledgement.
26. ISSUER OBLIGATIONS
An Issuer must disclose risks material to its business and securities. Generic wording must not obscure or replace Issuer-specific material risks. Risk disclosures must be reviewed periodically and promptly updated after material change, in accordance with IDSX Continuous Disclosure Rules and other requirements.
27. SPONSOR RESPONSIBILITIES
Where appointment is required, a Sponsor must take reasonable steps within its role to assess whether material risks in an admission application are sufficiently clear and complete. A Sponsor must not knowingly allow materially misleading or incomplete risk information to be submitted to IDSX.
28. PROMINENCE OF RISK DISCLOSURE
Material risks must not be hidden in disclaimers, footnotes or places ordinary investors are unlikely to notice. If marketing describes potential returns, growth or benefits, material risks must be presented fairly and not obscured by promotion.
29. INVESTOR ACKNOWLEDGEMENT
IDSX or an authorised Broker may require acknowledgement that the investor understands investment risk and potential capital loss; liquidity may be limited; IDSX does not guarantee performance; Digital Securities may have wallet and transfer limits; technology and blockchain risks may apply; and the investor remains responsible for decisions. Acknowledgement does not waive investor rights or remove legal duties of IDSX, Issuers, Brokers or Participants.
30. NO IDSX ENDORSEMENT
Admission is not endorsement of an Issuer, an investment recommendation, a guarantee of financial condition or security value, or a statement that the investment suits any investor. It means only that applicable admission requirements were met at the relevant time.
31. INVESTOR RESPONSIBILITY
Investors must assess suitability for their own circumstances, including objectives, finances, experience, ability to bear loss, liquidity needs, horizon, tax position and legal or jurisdictional restrictions. Independent professional advice should be obtained where appropriate.
32. ADDITIONAL RISK DISCLOSURES
IDSX may require additional disclosures for an Issuer, security, jurisdiction, blockchain network, new settlement mechanism, unusual corporate structure or other material risk not adequately covered by standard disclosures. IDSX may require delivery before trading or continued trading.
33. RECORD KEEPING
Issuers, Brokers and other Participants must retain risk-disclosure and investor-acknowledgement records where IDSX Rules or law require. Records must be kept for the applicable period and made available to IDSX or a competent authority where legally required.
34. COMPLIANCE AND ENFORCEMENT
Non-compliance may breach IDSX Market Rules. Under its Disciplinary & Enforcement Measures, IDSX may require corrective disclosure or further warnings; restrict activities; suspend trading; impose conditions on a Participant or Issuer; refer a matter for discipline; or refer suspected legal breaches to the relevant regulator.
35. INTERACTION WITH APPLICABLE LAW
These Rules establish IDSX market requirements and do not replace, limit or modify any obligation imposed by applicable law.
Issuers and Market Participants remain responsible for determining and complying with all legal and regulatory requirements applicable to their activities, including, where relevant, requirements relating to:
(a) financial product disclosure;
(b) fair dealing and misleading or deceptive conduct;
(c) securities offering and distribution;
(d) investor protection;
(e) licensing and registration;
(f) anti-money laundering and countering the financing of terrorism (AML/CFT);
(g) sanctions and other financial crime controls;
(h) custody and client assets;
(i) privacy and data protection;
(j) taxation;
(k) cross-border offering and participation restrictions; and
(l) any other applicable financial markets, corporate or securities laws.
Where an IDSX requirement conflicts with a mandatory requirement of applicable law, the applicable law shall prevail to the extent of the conflict.
Compliance with these Rules does not, by itself, constitute compliance with applicable law.
IDSX may require an Issuer or Market Participant to provide information, legal analysis, regulatory confirmation or other evidence reasonably necessary to demonstrate compliance with applicable legal or regulatory requirements.