Securities crowdfunding in Malaysia is developing incredibly fast, pushing the country in a leading position in the area. In fact, in August 2014, the Securities Commission of Malaysia (SC) launched a public consultation on proposed regulations for crowdinvesting. On that occasion, Crowd Valley published an article, explaining the drafted legal framework. Now that the public consultation is over, SC has released a document with the comments received and the changes proposed.
Even though many parts remained unchanged, there are some interesting modifications, that in certain cases represent a novelty compared to other national securities crowdfunding legal frameworks. For instance, SC, based on the feedback received during the public consultation period, is going to allow the creation of a secondary market for securities bought on crowdfunding portals. The financial conduct authority justified this choice, explaining that it sees it as a way to address liquidity risks. According to the official document, platforms will be responsible to provide an avenue for investors to exchange securities, during a window period of two weeks every six months.
Another interesting point that emerges from SC’s publication is related to the types of issuers that can raise finance through crowdfunding portals: SC expands this opportunity to local private companies hold by non-Malaysians, in order to encourage foreign investments, and to microfunds, such as venture capital funds. The latter will be able to raise any amount through securities crowdfunding portals, provided
(a) they are registered with SC as venture capital
(b) have a specified investment objective
(c) raise funds only from sophisticated investors.
If the maximum amount that a company can raise through the portals remains set at RM 5 million (except for microfunds that have no limit), SC relaxed the terms for retail investor and business angels. The former can now invest up to RM 5,000 (about $1,534) per issuer and a maximum of RM 50,000 (about $15,344) within a 12-month period. The latter, instead, are not considered sophisticated investors (for which SC poses no cap on investments), but are being recognized as individuals who can tolerate a higher risk and therefore the annual limit on investments for them is of RM 500,000 (about $153,444).
Last but not least, platforms which in the draft regulations were forbidden to feature trending pitches on the their website, are now allowed to do so, as well as to give general advice on the valuation of shares.
Overall SC seemed to be very responsive to public’s comments and ideas, taking them into consideration in most of the cases. The result is a regulation for securities crowdfunding that display some interesting elements of novelty compared to other countries’. Whether in practice the regulation will help the local securities crowdfunding market to flourish, we will see it very soon.
References
Securities Commission Malaysia (2014). PROPOSED REGULATORY FRAMEWORK FOR EQUITY CROWDFUNDING.
Image credit to: Eric Teoh http://bit.ly/1rzlt3v
Another interesting point that emerges from SC’s publication is related to the types of issuers that can raise finance through crowdfunding portals: SC expands this opportunity to local private companies hold by non-Malaysians, in order to encourage foreign investments, and to microfunds, such as venture capital funds. The latter will be able to raise any amount through securities crowdfunding portals, provided
(a) they are registered with SC as venture capital
(b) have a specified investment objective
(c) raise funds only from sophisticated investors.
If the maximum amount that a company can raise through the portals remains set at RM 5 million (except for microfunds that have no limit), SC relaxed the terms for retail investor and business angels. The former can now invest up to RM 5,000 (about $1,534) per issuer and a maximum of RM 50,000 (about $15,344) within a 12-month period. The latter, instead, are not considered sophisticated investors (for which SC poses no cap on investments), but are being recognized as individuals who can tolerate a higher risk and therefore the annual limit on investments for them is of RM 500,000 (about $153,444).
Last but not least, platforms which in the draft regulations were forbidden to feature trending pitches on the their website, are now allowed to do so, as well as to give general advice on the valuation of shares.
Overall SC seemed to be very responsive to public’s comments and ideas, taking them into consideration in most of the cases. The result is a regulation for securities crowdfunding that display some interesting elements of novelty compared to other countries’. Whether in practice the regulation will help the local securities crowdfunding market to flourish, we will see it very soon.
References
Securities Commission Malaysia (2014). PROPOSED REGULATORY FRAMEWORK FOR EQUITY CROWDFUNDING.
Image credit to: Eric Teoh http://bit.ly/1rzlt3v
About the author - Irene Tordera
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.
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