- January 20, 2022
- Posted by: global361
- Category: Blockchain
The Guidelines on Digital Assets (Guidelines) are issued by the Securities Commission Malaysia (SC) pursuant to section 377 of the Capital Markets and Services Act 2007 (CMSA)
These Guidelines set out the requirements for–
(a) an issuer seeking to raise funds through digital token offering; and
(b) the registration of a platform operator to operate an Initial Exchange Offering (IEO) platform
These Guidelines are in addition to and not in derogation of any requirements provided for under securities laws or any other guidelines issued by the SC. Where an issuer issues a digital asset which is an existing type of securities such as unit trust funds, bonds, warrants and options, the issuer must comply with the existing requirements for such issuance as set out in the relevant SC’s guidelines and Bursa rules. These Guidelines must be read together with other relevant laws and guidelines including payment services and foreign exchange administration laws administered by BNM.To assist with the interpretation of the requirements under these Guidelines and their application, guidance has been provided, where appropriate. Any action or conduct which departs from the guidance will be taken into account by the SC in determining compliance with these Guidelines.
An issuer must be a company incorporated in Malaysia, but does not include an exempt private company and public-listed company. The issuer must have its main business operations carried out in Malaysia.
An issuer must have a minimum paid-up capital of RM500,000. The SC may impose additional financial requirements that commensurate with the nature of the issuer’s business.
Moratorium on equity interest
Members of the Board and senior management must, in aggregate, own at least 50% equity holding in the issuer, on the date of the issuance of the digital tokens. Post issuance of the digital tokens, the initial Board and senior management members may only sell, transfer or assign not more than 50% of their initial equity holding until completion of the digital token’s project. Any new member of the Board or senior management who purchased equity holding in the issuer post issuance of the digital tokens are not allowed to sell, transfer or assign more than 50% of their equity holding until completion of the project for which funding is sought.
An issuer must only carry out an offering of digital tokens through an IEO platform and not through any other means. An issuer must submit its application to an IEO operator for an approval in a form and manner as may be specified by the IEO operator, including a fit and proper declaration of its Board members and senior management.
Offering of digital tokens
An issuer must not offer any digital tokens to any person before the IEO operator’s approval has been obtained.
An issuer must not offer a digital token to any person unless the offer is also accompanied with a disclosure document (Whitepaper) that has been approved by the IEO operator. A copy of the Whitepaper that has been furnished to the IEO operator must also be furnished to the SC in the manner and form as may be specified by the SC. An issuer must ensure that all information submitted or contained in its Whitepaper is true and accurate and shall not contain any information or statement which is false or misleading or from which there is a material omission.
Where a Whitepaper has been furnished to the IEO operator and the SC but before the closing of the offer period, and the issuer becomes aware that a matter has arisen and information in respect of that matter would have been required by these Guidelines to be disclosed in the Whitepaper if the matter has arisen at the time the Whitepaper was prepared there has been a significant change affecting a matter disclosed in the Whitepaper, the Whitepaper contains a statement or information that is false and misleading or the Whitepaper contains a statement or information from which there is a material omission, the issuer shall forthwith notify the IEO operator and, as soon as practicable, furnish a supplementary Whitepaper to the IEO operator and the SC.
An issuer must comply with the requirements of these Guidelines at all times,ensure that the minimum capital requirement as set out ,immediately notify the IEO operator and SC of any failure to comply with any requirement of these Guidelines,and submit to the IEO operator the fit and proper declaration of any subsequent member appointed to its Board or senior management team within three (3) business days from his appointment to the Board or senior management. This is in addition to the fit and proper declaration
Reporting and Audit
Reporting requirements 7.01 An issuer must prepare and cause to be published on the IEO platform an annual report and semi-annual report which contain necessary information to enable token holders to evaluate the performance of the issuer.
Marketing and promotion
An issuer must ensure that all information disseminated for marketing or promotion is consistent with the contents of its Whitepaper for investors are appropriately displayed in all marketing and promotional materials including its website. An issuer must not engage any third party individual(s) or entity, other than an IEO operator, to endorse or represent the issuer with the intended purpose of marketing, promoting, gaining publicity or soliciting funds for its digital token offering.
Requirements for registration of an IEO operator
The SC may register a person as an IEO operator, subject to the person satisfying the requirements set out in this Part. An IEO operator must be a locally incorporated company unless specified otherwise by the SC. The company that seeks to be an IEO operator must make the application for registration to the SC by itself.
An IEO operator must have a minimum paid-up capital of RM5,000,000.The SC may at any time impose additional financial requirements or other terms and conditions on an IEO operator that commensurate with the nature, operation and risks posed by the operator on the market.
Directors and Responsible Person
An IEO operator must ensure that members of its board members, chief executive, controller, and any person who is primarily responsible for its operations or financial management are fit and proper, taking into account the criteria in Appendix 1, and are suitably qualified. A person appointed as a responsible person must be a chief executive of the IEO operator or any person who is primarily responsible for its operations.
An IEO Operator should identify possible sources of operational risk, both internal and external, and mitigate their impact through the use of appropriate systems, policies, procedures, and controls. Systems should be designed to ensure a high degree of security and operational reliability including having adequate capacity.
Managing conflict of interest
An IEO operator, including its individual directors and shareholders, must disclose to the public on its platform if it holds any shares in any of the issuers hosted on its platform; or it pays any referrer or introducer, or receives payment in whatever form, including payment in the form of shares, in connection with an issuer hosted on its electronic platform.
Register of initial token holders
An IEO operator must maintain a register of initial token holders who subscribed for the digital tokens during the offer period and enter into the register in the case of an investor who is a Malaysian, the name, address and identity card number. In the case of a non-Malaysian investor the name, address and passport; in the case of an investor who is a corporation, the name, registered address and registration number of the corporation, including details of its directors and shareholders total amount of digital tokens subscribed by each investor and any other relevant information or particulars of the investor required by the SC.
Cessation of Business or Operations
An IEO operator shall not cease its business or operations without prior engagement with the SC. The SC may issue a direction or impose any term or condition for the purposes of ensuring the orderly cessation of the business or operations of the IEO operator. The cessation of business or operations will not take effect until the SC is satisfied that all the requirements stated in the securities laws, relevant guidelines issued by the SC and any other relevant laws or requirements, have been fulfilled.
Withdrawal of Registration
The SC may withdraw the registration of an IEO operator if the IEO operator fails to meet the requirements as provided in these Guidelines, the IEO operator fails or ceases to carry on the business or activities for which it was registered for a consecutive period of six months, the IEO operator contravenes any obligation, condition or restriction imposed under these Guidelines or fails to pay any fee prescribed by the SC.
Limit of Funds Raised by the Issuer
The issuer must demonstrate to the IEO operator that the gross proceeds to be raised from the digital token offering would be sufficient to undertake the project or business as proposed in the Whitepaper.The digital tokens issued by an issuer must be fully subscribed, with no permitted over-subscription of such digital tokens, to be effective. In the event an issuer is unable to comply with the requirements, the IEO operator must return any monies collected from token holders within fourteen (14) days from the date of the closure of the digital token offering.
Power of the SC in Relation to IEO Operator
The SC may, in registering an IEO operator, impose any term or condition, and at any time vary, add or remove any term or condition.
The SC may conduct periodic assessment of a IEO operator’s compliance with any or all of its regulatory obligations and request documents or other assistance as required.
Submission of Application
All registration forms, periodic reports and other additional documents as required in these Guidelines shall be submitted to the SC.