Tokenised Stocks are offered by Luno (Pty) Ltd, an authorised Financial Services Provider (FSP No. 53314) and registered credit provider in terms of the National Credit Act, 2005 (CRCP Number NCRCP22123)

This Risk Disclosure document (this “Disclosure”) explains the nature, features, and risks of purchasing, holding, and trading Tokenised Stocks through the Luno platform. It is important that you read and understand this Disclosure in full before using the Tokenised Stocks product.

This Disclosure forms part of Luno’s Tokenised Stocks Terms and must be read together with those terms. Defined terms used but not specifically defined in this Disclosure will have the meaning given to them in the Tokenised Stocks Terms.

1. What Are Tokenised Stocks?

Tokenised Stocks are blockchain-based tokens which are backed by the underlying stock or exchange-traded fund (“ETF”), held by the Issuer, and, as such, correspond to the price performance of the relevant publicly traded share or ETF (as applicable). Each Tokenised Stocks is issued as a digital token and is intended to mirror the value of a specific underlying equity instrument.

Tokenised Stocks are not shares or equities themselves. They are a crypto-based mechanism to gain price exposure to traditional financial assets without directly holding those assets.

2. Tokenised Stocks Are Not Shares

Tokenised Stocks do not confer legal ownership of the underlying shares or ETFs. You are not a shareholder, and holders of Tokenised Stocks will have no legal claim to:

• vote at shareholder meetings;

• receive shareholder communications;

• exercise statutory rights; or

• receive direct dividends or distributions from the issuer of the underlying security.

Tokenised Stocks are crypto assets and do not constitute “securities” as defined under the Financial Markets Act, 2012 (the “FMA”). As such, they are not regulated as equities by the Johannesburg Stock Exchange (the “JSE”) or any other licensed exchange in South Africa.

3. Regulatory and Licensing Status

Luno is a registered Financial Services Provider under the Financial Advisory and Intermediary Services Act, 2002 (the “FAIS Act”) and is licensed by the Financial Sector Conduct Authority (FSCA) as a Crypto Asset Service Provider (a “CASP”). Luno is not required to and does not operate as a central securities depository, clearing house, or licensed exchange as understood under the FMA.

This product is offered only to clients domiciled in South Africa, and Luno reserves the right to restrict access to clients from jurisdictions where Tokenised Stocks may not be permitted in terms of the applicable regulation.

4. Custody and Asset Backing

Luno offers Tokenised Stocks issued by Backed Assets (JE) Limited, a private company incorporated in Jersey, holding COBO and CGPO consents by the Jersey Financial Services Commission (the “Issuer”). Full particulars of the Issuer’s product offering, including disclosure documents, can be found at https://assets.backed.fi/legal-documentation. You acknowledge and agree that it is your responsibility to familiarise yourself with the structure and the rights attaching to a particular Tokenised Stocks, as disclosed by the Issuer. 

Tokenised Stocks are designed to be backed by the corresponding equity, or ETF in the case of a tokenised ETF, which is held in custody with a third-party custodian or via a special purpose vehicle (“SPV”) arrangement managed by the Issuer. Luno does not issue the Tokenised Stocks itself, nor does it provide custody of the underlying equities.

The number of shares, or ETF units in the case of a tokenised ETF, which underlie (i.e. are held by the Issuer) the relevant token will adjust over time as dividends are reinvested (see section 5 below, entitled ‘Dividend Treatment), and shall furthermore adjust to take into account any corporate actions which may take place in the underlying company (e.g. a share split or share consolidation). You acknowledge that, as such, one Tokenised Stock will not necessarily correspond 1:1 with one underlying share, since the number of underlying shares held per Tokenised Stock will adjust based on dividend reinvestment and/or corporate actions in the underlying company.

The custodian or SPV assumes responsibility for maintaining the collateralisation and safekeeping of underlying assets. However, there are risks associated with:

• counterparty insolvency;

• asset misappropriation;

• regulatory intervention; and

• errors or delays in reconciliation.

Luno does not guarantee the performance or solvency of any custodian or partner involved in the asset-backing structure.

5. Dividend Treatment

Holders of Tokenised Stocks are not entitled to receive cash dividends or shareholder distributions. If and when dividends are declared on a particular equity that backs a Tokenised Stocks, the underlying will be automatically reinvested into additional stocks, increasing your balance over time.

Please note that the extent to which dividends are reinvested may depend on withholding tax obligations, custodial and operational delays, and/or changes to tax treatment.

Dividend treatment may vary between token types and is not guaranteed. You acknowledge and agree that it is your responsibility to read the relevant disclosures, including risk disclosures and facts sheets, for the relevant token that you intend to purchase.  

6. Redemption and Sale

You should familiarise yourself with the rights attaching to a particular Tokenised Stock, as disclosed by the Issuer. Tokenised Stocks may be redeemable with the Issuer via a redemption mechanism provided by the Issuer or its designated third-party redemption agent. Additional redemption fees may apply. You should familiarise yourself with the redemption and/or sale rights attaching to a stock, here: https://assets.backed.fi/legal-documentation. 

Redemption may be delayed, suspended, or denied in cases of:

• technical issues;

• compliance reviews (e.g. legal requirements); and

• lack of liquidity or custodian insolvency. 

Note that Tokenised Stocks cannot be redeemed for actual shares, nor transferred to a brokerage account or held in your name at a traditional securities registrar.

As an alternative to redemption with the Issuer, Tokenised Stocks may be sold to Luno, as counterparty, who will purchase the relevant tokens at prevailing market conditions.

7. Market and Trading Risks

Tokenised Stocks are traded on Luno’s crypto asset trading platform. As such, they are subject to the risks associated with crypto trading, including:

• high volatility in token prices;

• limited market depth or liquidity;

• slippage;

• platform downtime or latency; and

• potential market manipulation

You acknowledge that the market price of a Tokenised Stock may diverge from the market value of the underlying equity due to liquidity, demand, or custodial constraints. You furthermore acknowledge that the availability of the token, to be bought and sold with Luno, will depend on its liquidity. If Luno is unable to source liquidity of the relevant Tokenised Stock for any reason, then this may delay your ability to transact with the token.

8. Platform, Custody, and Technical Risks

Using Tokenised Stocks on Luno involves risks associated with blockchain technology, third-party integrations, and smart contracts. These include:

• smart contract bugs or exploits;

• wallet key compromise;

• custodian default;

• delays in asset reconciliation; and 

• cybersecurity threats.

Luno makes no representation that the platform or the token infrastructure is free from error or failure.

9. Regulatory Change Risk

Tokenised Stocks are a novel and evolving product category. There is a risk that Tokenised Stocks may be subject to:

• reclassification under the FMA or FAIS Act; or

• future prohibitions and/or additional licensing requirements.

Luno reserves the right to modify, suspend, or terminate its Tokenised Stocks offering in response to regulatory developments with or without prior notice.

10. No Investment Advice

Luno does not provide investment advice, portfolio management, or personal recommendations. The offering of Tokenised Stocks does not constitute an invitation to invest in securities or a collective investment scheme.

All trading decisions are made at your own risk. You should seek independent financial, tax, and legal advice before using Tokenised Stocks.

11. Taxation

Income derived from trading or holding Tokenised Stocks may be taxable in South Africa under the Income Tax Act, 1962 or other applicable laws. As token holder, you acknowledge that you are solely responsible for determining, declaring, and paying any taxes which may become due. Luno does not provide tax advice and does not withhold taxes on your behalf.

12. Amendments

This Disclosure may be updated from time to time to reflect changes in the product, the law, or operational procedures. Any changes will be published on the Luno website, and continued use of Luno’s Tokenised Stocks offering after publication constitutes acceptance of the revised terms.