SC Releases Public Response on Proposed Equity Crowdfunding Framework

25 September 2014 | Kuala Lumpur

Securities Commission Malaysia (SC) today released its public response on the proposed equity crowdfunding (ECF) framework.

A public consultation paper on ECF was issued by the SC on 21 August, 2014. The SC has since received comments and feedback from, amongst others, potential crowdfunding operators, entrepreneurs, venture capital firms, financial institutions and the general public. Having reviewed the comments and feedback received, revisions to the proposed framework have been made.

In order to create awareness on this innovative market-based financing, the SC recently organised the SC Synergy & Crowdfunding Forum which attracted over 600 participants. Thought leaders in the global crowdfunding industry, including Jason Best, co-author of the US equity crowdfunding regulatory framework, shared with the audience insights on the development of this alternative funding channel.

The salient features of the framework are –

Issuers

- All locally incorporated private companies (other than exempt private companies) are eligible to participate on the ECF by issuing ordinary and preference shares to the public.

- An issuer will be allowed to raise up to a RM3 million for a 12 month period and a total maximum of RM5 million through the platform.

- Microfunds that are registered with the SC as venture capital firms and have an identified business plan are also allowed to participate on the ECF platform. No fundraising limit is imposed on microfunds but they are only permitted to target sophisticated investors.

Investors

- Retail, sophisticated and angel investors are allowed to invest in companies hosted on the ECF platform subject to the investment limit specified by the SC.

- Issuers are required to file a standardised disclosure document with the ECF operator providing amongst others, key information on the issuer, the offering and the amount to be raised.

- Investors will be given a cooling off period of 6 days within which they may withdraw their investment.

- If there is a material adverse change effecting the project or the issuer, investors are also given a period of 14 days to opt-out of the investment.

- Funds invested will be kept by the ECF operator in a trust account and will only be released to the issuer after specified conditions are met.

Both the consultation paper and response paper are available here on the SC’s website.

SECURITIES COMMISSION MALAYSIA