Malaysia’s SC lays out regulations for P2P financing

• Allows companies to access market-based financing to fund projects or businesses
• Parties interested in operating P2P platforms can apply from May 2 onwards

 
THE Securities Commission Malaysia (SC), which led the way for legalising equity crowdfunding (ECF) in the region, has now announced the regulatory framework for peer-to-peer (P2P) financing.
 
The framework sets out requirements for the registration of a P2P platform as provided in the amended Guidelines on Recognised Markets, the SC said in a statement.
 
The introduction of the new Chapter 13 in the Guidelines provides for the duty and responsibility of the operator, and the type of issuer and investor who can participate in P2P financing.
 
The P2P framework will enable sole proprietorships, partnerships, incorporated limited liability partnerships, private limited and unlisted public companies to access market-based financing to fund their projects or businesses, via an electronic platform.
 
The SC said that the P2P framework is part of its ongoing effort to provide greater access to market-based financing through the application of technology solutions.
 
Last February, it released a similar regulatory framework for ECF, saying that it considers alternative funding channels such as ECF a crucial and innovative market-based structure to facilitate the growth of new small-scale enterprises which contribute significantly to the national economy.
 
This came after a period of public feedback after the release of a consultation paper in August, 2014.
 
Malaysia was the first country in Asean to introduce a regulatory framework to facilitate ECF, with six registered ECF platforms expected to be fully operationalised in 2016.
 
Meanwhile, the SC said that parties interested to operate a P2P financing platform may submit their application to the Commission from May 2 onwards. They must be locally incorporated and have a minimum paid-up capital of RM5 million (US$1.3 million).
 
The Guidelines also stipulate that the operator’s board of directors must be fit and proper.
 
Ongoing obligations are imposed on the P2P operator such as ensuring compliance with platform rules, having in place an efficient and transparent risk scoring system for issuer, and a contingency arrangement to ensure business continuity.
 
To protect investors, a P2P operator is required to ensure that monies obtained from investors are placed in a trust account until the minimum target amount is met, the SC said.
 
When an issuer makes repayment to the investor, the P2P operator is also obliged to place the investors’ monies in a trust account.
 
In order to enable investors to make an informed investment decision and understand the risks of their investment, the P2P operator must make available all the relevant information to the investor.
 
There is no investment limit imposed on a sophisticated investor and angel investor while retail investors are strongly advised to limit their investment exposure in P2P to a maximum of RM50,000 (approx. US$13,000) at any point of time.
 
The amended Guidelines on Recognised Markets are available on SC’s website www.sc.com.my and will come into effect on May 2.
 
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