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Malaysia’s First Equity Crowdfunding Laws Require Licensed Trustee Services
Businesses that intend to use equity crowdfunding (ECF) to raise capital in Malaysia are now required to appoint a licensed trustee to hold and administer the funds during the crowdfunding offer period. Celine Chan, Managing Director of the Malaysia office, discusses the business advantages of the new ECF legislation and its impact.
To keep pace with the growing investor market, Malaysia is the first country in the Asia Pacific region to legislate equity crowdfunding (ECF), standardising activities and translating innovation into wealth.
In July this year, the Capital Markets and Services Bill 2015 was passed; regulating the ECF framework and promoting private financing for research and development, commercialisation and innovation (R&D&C&I).
Ranjit Ajit Singh, Chairman of Securities Commission of Malaysia (SC) and Malaysian Venture Capital Development Council, said at the Synergy and Crowdfunding Forum 2015 (SCxSC) in June, that the ECF framework is an important milestone for inclusivity in the Malaysian capital market.
He said, “the establishment of the ECF is a component of the SC’s strategy to democratise finance. Over the years, Malaysia has developed a diversified and well established MYR2.8 trillion capital market, helping businesses to grow as well as financing long-term investments in the economy.”
Global connectivity within the digital space has broken down the geographical limits for Malaysian entrepreneurs who seek venture funding to grow their businesses. The online ECF platforms make it easier for them to promote their businesses and attract investors from the general public because all information is available there.
To protect the investors and ensure their investments are safeguarded, the ECF requires funds to be held in a trust, by a certified trustee that is approved by the SC, until the funding is approved.
The role of a trustee includes the disbursement of funds to issuers when the offer is successful in meeting required criteria. Or issuing an investment refund to investors during a cooling off period when the offer is not successful.
Crowdplus is one of the six operators approved by the SC; the organisation collaborates with Malaysian government agencies to tap into various early-stage incubators and investing networking groups. Their aim is to be the ASEAN ECF hub, with partners in other markets including Hong Kong, China, Taiwan and New Zealand.
How can we help?
TMF Group has been appointed as a trustee to three of the ECF platforms in Malaysia. We understand the work flow and process of the ECF, offering trustee services to help the licensed operator meet the license criteria, as well as to those looking into crowdfunding and trustee services. TMF Group currently has 50% of the market share of total Malaysian license holders.