While the SC fully supports the development of electronic commerce in the Malaysian capital market, the SC is also entrusted with the duty to protect investors in Malaysia from illegal activities. Section 32 of the Securities Commission Act 1993 is specifically enacted to regulate the offer of securities in the primary market.
Under section 32 of the Securities Commission Act 1993, a person ("offeror") who:
- makes available offers for subscription or purchase of securities in Malaysia; or
- issues an invitation for subscription or purchase of securities in Malaysia, is required to submit a proposal to the SC. A person who fails to submit such a proposal commits an offence, who on conviction is liable to a fine not exceeding RM1,000,000 or to imprisonment for a term not exceeding 10 years or both.
It is the SC's view that an offering of securities on the Internet that is accessible within Malaysia is an offer that falls within the provisions of section 32. The approval of the SC must first be sought if the offer is accessible within Malaysia or if acceptances from within Malaysia have not been expressly excluded.
However, the SC will take into account the following factors in order to determine whether an offer of securities on the Internet would be subject to the rigours of section 32 of the Securities Commission Act 1993:
- The intention of the person making the offer i.e. whether the offer is in fact targeted to a person in Malaysia. In discerning the intention of the offeror, the SC will consider the offeror's use of disclaimers, the establishment of local distribution networks, concurrent advertising or publicity in other forms of media in Malaysia, or denomination of prices in Malaysian currency;
- The penetration of the offering of securities in Malaysia i.e. whether any person in Malaysia accepts the offer. This includes consideration of the issuer's precautions to screen address and residency information and the amount of unauthorised sales; and
- The involvement of a person from Malaysia in making the offer.
The SC recommends offerors or potential offerors to take certain measures to ensure that such offerings do not fall within section 32 of the Securities Commission Act 1993.
These recommendations serve as a guideline for offerors and is neither legal advice nor does it purport to be an exhaustive list that will guarantee an offeror exclusion from the ambit of section 32 of the Securities Commission Act 1993. Such measures include:
- Not publishing the offer or invitation in websites that are frequently visited by or draws the attention of a person in Malaysia. For example offering in web sites that have ".my" in its address or that is offering content relevant to a person in Malaysia.
- Ensuring that the offering does not contain information specifically relevant to a person in Malaysia. For example, tax rates or prices which are presented in Malaysian currency.
- Designing or taking steps to automatically exclude and/or reject any subscriptions made by a person from Malaysia and to have a monitoring system on applications made by such person. For example, an offeror may programme their subscription system in such a manner to automatically reject any applications for subscription from a person in Malaysia where the telephone, address and postal addresses indicate that they are from Malaysia.
- Restricting the access of information of the offering so that a person in Malaysia is unable to view documents that are related to the offering.
- Incorporating a clear jurisdictional disclaimer into the on-line prospectus / offer document stating that the offer is not intended to be available in Malaysia or to any person in Malaysia or which clearly states at which jurisdictions that the offer is targeted in a list that excludes Malaysia.
The SC would also take this opportunity to remind all persons in Malaysia to be wary of fraud that can be committed via the Internet. Traditional violations have been made easier through the misuse of technology. A person who invests in securities that have not been approved by the SC should also understand and be aware of the increased possibility of being defrauded.
Whilst the SC conducts surveillance of offers that are made through the Internet, it is of the view that the best protection against fraud, particularly those committed over the Internet, is for investors to be aware of the risks associated with such offers. Investors should make the effort to ascertain the authenticity of the offer, as well as determine if such offers have been approved by the relevant regulatory authorities. An investor may check with the SC,
by contacting the Corporate Affairs Department at telephone number 03-6548000 or e-mail: [email protected], to find out whether securities offered via the Internet have been approved by the SC prior to investing in those securities.
