Coming off a highly successful crowdfunding and angel investing conference, Securities Commission Malaysia has released the public comments on the proposed regulatory framework for equity crowdfunding. The consultation outlining the regulations was released this past August and since being published SC has received comments from a diverse group of individuals including VC firms, entrepreneurs, financial institutions and potential crowdfunding operators. SC has made certain revisions to proposed rules that reflect the public feedback.
The main features of the equity crowdfunding regulations 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 (approximately $922K) 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.
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