Last year Malaysia was the first country in South-East Asia to introduce a framework for Equity Crowdfunding (ECF), in an effort to provide wider access to financing for startups and SMEs and create a strong alternative finance market. After having released these guidelines for digital investing, the securities commission authorized the launch of six platforms (Alix Global, Ata Plus, Crowdonomic, Eureeca, PitchIN and Propellar Crowd+) allowed to facilitate digital investing for non-accredited investors.
INTRODUCED CRITERIA FOR P2P FINANCING PLATFORM OPERATORS
For those interested to operate a peer-to-peer platform, there are several criteria that must taken in consideration, including that the businesses be incorporated in Malaysia with a minimum paid-up capital of RM5 million (about US$1.3 million), and a board of directors that must be fit and proper.
Ongoing obligations are imposed on the P2P operator such as ensuring compliance with platform rules, carry out investor education programmes, having in place processes to monitor anti-money laundering as well as an efficient and transparent risk scoring system for issuer, a contingency arrangement to ensure business continuity and ensure that its rules set out a rate of financing that is not more than 18% per annum.
In order to protect investors, a P2P operator is required to make available all the relevant information to the investor and ensure that the money obtained from them is placed in a trust account until the minimum target amount is met. When an issuer makes repayments to the investor, the P2P operator is then obligated to put that money in trust account.
Only locally registered sole proprietorships, partnerships, incorporated limited liability partnerships, private limited and unlisted public companies, will be allowed to use the P2P platform. An issuer is permitted to keep any amount raised through a P2P platform if it was raised at least 80% of the target amount.
There is no investment limit or restriction for sophisticated investors or angel investors interested in investing through a P2P platform. While for retail investors, the operators should encourage them to limit their investments on any P2P platform to a maximum of RM50,000 (about US$13,000) at any period in time.
If you’re interested to read further about the duty and responsibility of a P2P operator in Malaysia, as well as at the requirements for issuer and investor willing to participate in P2P, you can check this exhaustive document released by the SC. You can find the new rules in the Chapter 13 of the document (Guidelines on Recognised Markets).
In our work at Crowd Valley, we are fortunate to work with some of the world’s foremost pioneers in new regulatory environments on setting industry best standards in practical terms.
Similar types of regulations have emerged all over the world. To name a few in October the SEC approved the Title III of JOBS Act, making online investing possible for retail investors. A few months prior, South Korea launched “Financial Investment Services and Capital Markets Act” and Portugal regulations for securities crowdfunding. We welcome discussions with leaders in their fields on how to leverage synergies and best practices from existing frameworks in emerging environments.
Alessandro is Co-founder & CMO of Crowd Valley. He has worked in the fintech industry, with marketplace investing and lending, since 2011. Has built and managed digital companies with distributed teams and international partners, and gained experience with both startups and large corporations, having worked with British Telecom, Bloomberg and the Grow VC Group.
Alessandro grew up in Italy, where he graduated with a B.A. in Economics at University of Parma, before to obtain a M.S. in Finance at Regent’s University London. He studied and worked in many different cities, including Munich, Geneva, London, Barcelona and Valencia. Genuinely passionate about financial technology and innovation, he loves to spend his spare time traveling and discovering new cultures. You can find him on Twitter at @aleravanetti.