KUALA LUMPUR (Feb 10): The Securities Commission Malaysia (SC) said the board of directors of operators of equity crowdfunding platforms must have the ability to operate an orderly, fair and transparent market.

In a press release, SC, said the requirement - which comes together with a slew of other requirements 
for the registration of equity crowdfunding (ECF) platforms under its new guidelines on regulation of markets under Section 34 of the Capital Markets and Services Act 2007 - is to provide governance arrangement for the operator of ECF platforms.

As the operator plays a critical role in ensuring confidence in the ECF platform, hence the guidelines entrust the operator with obligations to ensure issuers' compliance with platform rules, it said.

"The operator may deny an issuer access to its platform if it is of the view that the issuer or the proposed offering is not suitable to be hosted on the platform. The operator is also required to ensure that funds obtained from investors are safeguarded in a trust account until the funding goal is met," it said in the statement.

Under the framework of the new guidelines, SC said an eligible issuer can raise up to RM3 million within a 12-month period and that issuers will be able to tap on investments from retail, sophisticated as well as angel investors, subject to the investment limits as provided in its guidelines.

"ECF investors are given a six-day cooling off period, within which they may withdraw the full amount of their investment. In addition, if there is any material adverse change relating to an issuer, the investors must be notified of such change. The investors will be given the option to withdraw their investment if they choose to do so within 14 days after the said notification," it said.

In September 2014, SC released its public response paper on the proposed ECF framework after having reviewed the comments and feedback received from various stakeholders on the proposed ECF framework.

ECF is a new form of fundraising that allows start-ups or other smaller enterprises to obtain capital through small equity investments from relatively large numbers of investors, using online portals to publicise and facilitate such offers to crowd investors.

The full guidelines introduced by SC today is available on its website www.sc.com.my. These Guidelines will replace the Guidelines on Regulation of Markets (issued in September 2007) and have been effective from Feb 9, 2015.