KUALA LUMPUR (April 13): The Securities Commission Malaysia (SC) has introduced a regulatory framework to facilitate peer-to-peer (P2P) market-based financing for various partnerships to fund their projects via an electronic platform.

In a statement, the SC said those interested to operate a P2P market-based financing platform may submit their applications beginning May 2. They must be locally incorporated with a minimum paid-up capital of RM5 million.

The framework is designed for sole proprietorships, partnerships, incorporated limited liability partnerships, private limited and unlisted public companies.

The SC said the framework is part of its ongoing effort to provide greater access to market-based financing through the application of technology solutions.

"In 2015, Malaysia [became] the first country in Asean (Association of Southeast Nations) to introduce a regulatory framework to facilitate equity crowdfunding, with six registered equity crowdfunding platforms expected to be fully [operational] in 2016," it said.

The regulator also said P2P market-based financing sets out the registration requirements for the platform as provided in the amended Guidelines on Recognised Markets.

"The introduction of the new chapter 13 in the guidelines provides for the duty and responsibility of a P2P (financing) operator, the type of issuer and investor who can participate in P2P (financing). It also stipulates that the operator's board of directors must be fit and proper.

"Ongoing obligations are imposed on the P2P (financing) operator such as ensuring compliance with platform rules, having in place an efficient and transparent risk scoring system for issuer and contingency arrangement to ensure business continuity," it said.

The SC said that to protect investors, a P2P financing operator is required to ensure that monies obtained from investors are placed in a trust account until the minimum target amount is met.

It said when an issuer makes repayment to the investor, the P2P financing 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 (financing) 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 (financing) to a maximum of RM50,000 at any point of time," the SC stated.