|1.1||How is SC regulating P2P in Malaysia?|
|As part of SC’s effort to nurture and facilitate market-based innovation in FinTech under the aFINity@SC initiative, the regulatory framework for equity crowdfunding (ECF) was introduced in February 2015.Continuing on the initiatives, SC is now introducing the regulatory framework for P2P, setting out requirements for the registration of a P2P platform as provided in the amended Guidelines on Recognized Markets (the Guidelines).The introduction of the new Chapter 13 in the Guidelines also provides for the duty and responsibility of a P2P operator, type of issuer and investor who can participate in P2P.The P2P framework will enable eligible businesses and companies to access market-based financing to fund their projects or businesses, via an electronic platform.|
|1.2||How does P2P work?|
|P2P platform facilitates businesses or companies to raise funds from both retail and sophisticated investors through an online platform. No individual seeking personal financing will be allowed to use a P2P platform.Investors who invest through a P2P platform operated by SC’s registered P2P operators are buying securities in the form of an investment note or Islamic investment note, which will be issued by the businesses or companies. The issuer of the investment note or Islamic investment note is obliged to pay the investors over a time period, with interest or profit.|
|1.3||How does an investor invest through P2P?|
|The process for investing through a P2P platform may differ from operator to operator depending on the platform rules set by the operators.In general, an investor decides how much they want to invest and which issuer they want to invest in after reading and understanding the information disclosed to.
For example, Issuer X issues an investment note which seeks to raise RM100,000. The investment note is rated “A” with a rate of return 0.5 per cent per month for a 12-month period.An investor investing in Issuer X will thus receive payment periodically until the end of the tenure of the investment note.
|1.4||How does an issuer raise funds through P2P?|
|When an issuer applies for funding, the P2P operator will evaluate the issuer’s suitability, amongst others, by checking its credit history and capacity to repay. These factors allow the P2P operator to assess and assign a risk score to the investment note or Islamic investment note.|
|2.1||When will the P2P framework be implemented?|
|The new P2P framework will come into effect on 2 May 2016. However, interested parties and the public may already access the Guidelines from the SC’s website. The P2P framework can be found in chapter 13 of the Guidelines on Recognized Markets which is available here.|
|2.2||When can a prospective operator of a P2P platform submit its application to SC to be registered as a Recognized Market Operator?|
|Operators interested in establishing and operating a P2P platform can submit their application to the SC from 2 May to 1 July 2016.|
|2.3||Will SC accept any application submitted after 1 July 2016?|
|1 July 2016 will be the closing date for initial batch of application which the SC will process.|
|2.4||Do applicants need to pay any fees when submitting an application to SC to be registered as a Recognized Market Operator?|
|When applying to SC to be registered as a Recognized Market Operator, the applicant has to attach a payment of RM5,000 together with its application.|
|3.1||Who can operate a P2P platform?|
A P2P operator must be a body corporate incorporated under the Companies Act 1965 with a minimum paid-up capital of RM5 million.
A prospective P2P operator must be able to demonstrate to SC that it is able to satisfy the relevant criteria as mentioned in the Guidelines. Among others, the SC must be satisfied that the operator’s directors are fit and proper; it is able to operate an orderly, fair and transparent market and ensure that there is an efficient and transparent risk scoring system in place.
Further, it must also demonstrate that it is able to manage risks associated with its business and operation including having processes and contingency arrangement in the event it is unable to carry out its operations.
|3.2||What are the obligations of a P2P operator?|
Among others, a P2P operator must be able to determine the suitability of issuers to be hosted on the platform. This includes conducting background checks on the prospective issuers to ensure its fit and properness, verify its business proposition and carry out assessment on its creditworthiness.
A P2P operator must also ensure compliance of its platform rules which are approved by SC and make available all the relevant information to the investor.
In addition, a P2P operator must ensure that monies obtained from investors are placed in a trust account until the minimum target amount is met. When an issuer makes repayment to the investor, the P2P operator is also obliged to place such repayment monies in a trust account. A P2P operator must also have in place processes to manage any default by issuers including using its best endeavours to recover amount outstanding to investors.
|3.3||Are there any additional obligations imposed for the offering of Islamic investment notes on a P2P platform?|
|Yes. A P2P operator must also comply with Chapter 11 as well as paragraph 13.11 of the Guidelines for the offering of Islamic investment notes on its platform.|
|4.1||Who are the eligible issuers?|
|Only locally registered sole proprietorships, partnerships, incorporated limited liability partnerships, private limited and unlisted public companies, are allowed to be hosted on a P2P platform.|
|4.2||How much can an issuer raise on P2P platform?|
|There is no limit imposed by the SC on the amount of funds that may be raised by an issuer on a P2P platform. However, the amount of funds that may be raised on the P2P platform or the rate of financing will depend on the outcome of the issuer’s risk scoring conducted by the P2P operator.|
|4.3||Is an issuer allowed to keep the funds raised on P2P platform if it is less than the target amount?|
|An issuer is allowed to keep the funds raised on a P2P platform provided that he has at least raised 80 per cent of the target amount.Example: Issuer X sought to raise RM100,000 on a P2P platform, but received offers amounting to RM80,000. Issuer X is allowed to retain the RM80,000 in offers as it meets the 80per cent minimum threshold.|
|4.4||Is an issuer allowed to keep the funds raised on P2P platform if it exceeds the target amount?|
An issuer is not allowed to keep any amount which exceeds the target amount.
|4.5||Can an issuer be hosted concurrently on multiple P2P platforms?|
|An issuer can only be hosted concurrently for different purposes on multiple P2P platforms. However, the issuer is required to disclose to the P2P operator its intention to seek funding from other P2P platforms concurrently.|
|5.1||Who can invest on a P2P platform?|
|P2P investment opportunities are open to all investors. However, retail investors are encouraged to limit their investments exposure on any P2P platform to a maximum of RM50,000 at any one time in order to manage their risk exposure.
On 15 January 2016, Mr. A intends to invest another RM5,000 in an offering made by Issuer Y. He is encouraged not to make the investment in the offering by Issuer Y as he has reached the RM50,000 exposure in his P2P investment.
On 15 February 2016, Mr. A intends to invest another RM5,000 in an offering made by Issuer Z. As Mr. A has already received capital repayment of RM5,000 from Issuer X, his exposure in P2P investment is now RM45,000. Because his exposure is below RM50,000, Mr. A may proceed to make the RM5,000 investment to Issuer Z.
|5.2||Does the SC mandate any cooling-off period for investments made on a P2P platform?|
|The SC does not mandate any cooling-off period for investments made on a P2P platform.
However, P2P operators have the discretion to provide a cooling-off period for investors on their platforms.
|5.3||What information are investors entitled to obtain on a P2P platform?|
Investors are entitled to all relevant information pertaining to the issuers such as key characteristics of the issuers, purpose of the fundraising, its business plan and financial information. Such information will be published on the P2P platform.
The P2P operator will also have to make available on its platform the information on its risk scoring mechanism, criteria for determining a default, processes to manage a default, and information on late payment and default rate of issuers hosted on its platform.
Further, all fees, charges and other expenses relating to the investment must be disclosed by the P2P operator.
|5.4||What happens when there is a complaint or dispute regarding the investment?|
A P2P operator must have in place processes for complaints handling or dispute resolution. Such information must also be made accessible to all investors.
However, if the matter cannot be resolved by the P2P operator, the investor may refer the matter to the SC.