In February 2015, the Malaysian Securities Commission (SC) issued the Guidelines on Regulation of Markets under Section 34 of the Capital Markets and Services Act (CMSA) setting out the framework for the regulation of equity crowdfunding (ECF). Please click here for our client alert released earlier this year, which summarizes these guidelines and the equity crowdfunding framework in Malaysia.
In April 2015, subsequent to the issuance of these guidelines, the SC invited submissions from prospective ECF operators interested in establishing and operating ECF platforms in Malaysia. Twenty seven applications from foreign and domestic platform operators were submitted to the SC, and six were approved by the SC on 11 June 2015. The ECF as a fund raising platform is expected to be fully rolled out by the end of 2015.
In anticipation of this, Parliament has recently passed amendments to the CMSA to establish a new framework for recognized market operators. This will replace the registered electronic facility framework that currently applies to ECF operators. When the amendments are implemented, ECF operators will be subject to prescribed statutory duties and increased regulation aimed at providing investor protection. There is, however, no indication as to the timing for the amendment to the Companies Act, which should also be amended to facilitate the implementation of the ECF.
The development of the equity crowdfunding framework will be observed with keen interest. Although in its infancy, the framework is gaining traction with start-ups as an alternative route for fund raising, and will likely provide retail and sophisticated investors in Malaysia with an alternative platform for investment.