Malaysia could launch equity crowdfunding (ECF) in the middle of this year, if the government passes the necessary legislative amendments in the Capital Markets and Services Act and the Companies Act of Malaysia within this month.
When the legislation is implemented, the Securities Commission Malaysia (SC) will wield the responsibility of evaluating and registering qualified ECF facilitators or operators for the Malaysian market.
The ECF industry is not likely to be a protectionist one, as the regulator is looking to have qualified and experienced players in the market to help build the industry professionally.
Sources explained that there was no specification on how many foreign or local players the SC will approve as the deciding factor lies in the player’s experience and expertise.
“The independent evaluation team, set up for approving the operators, will look at a player’s credibility. All ECF players should be incorporated in Malaysia, however,” a source said, pointing to the recently released ECF guidelines.
“Foreign players who have been doing this for a long time will be considered, as they can come in with their expertise and help grow the industry here,” the executive added.
Although market talk earlier suggested that the SC would approve only two ECF platform operators, the source clarified that there was no cap on the participation.
“The SC is not putting a number to how many platforms it will approve so as not to restrict participation nor create a monopoly. However, the SC will have to carefully consider the number of entrants as the industry is still in its infancy,” a source told DEALSTREETASIA.
So far, Malaysia is still ahead of all the other Southeast Asian countries and Australia in its efforts of legislating ECF.
Also Read: Malaysia’s New ECF : Ambitious & Challenging
The legislation of ECF will enable startups and small and medium enterprises to raise funds from the public through a regulated alternate source of funding.
Currently, startups mostly go to the government for grants or to accelerators, angel investors, and venture capitalists to seek funds to push their businesses forward.
There are already some crowdfunding platforms in the market, with popularity in using these platforms rising more so recently. Among the local crowdfunding platform operators are PitchIn.my, SocialSharity.com and MyStartr.com.
Crowdonomic, a Singapore-based crowdfunding platform operator, has also been keeping tabs on the Malaysian ECF development as well.
Crowdfunding platforms, as opposed to ECF platforms, operate on rewards and donation basis.
In September 2014, the SC released its public consultation paper on ECF. That month, it also held a conference on ECF to further familiarise the business community and the public with ECF. In the most recent development, the regulator released its ECF guidelines in February.
Under the framework, an eligible issuer can raise up to MYR 3 million within a 12-month period. Issuers will be able to tap on investments from retail, sophisticated as well as angel investors, subject to the investment limits as provided in the guidelines.
As for ECF investors, they 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.
Since Malaysia announced it was pushing to legislate ECF, Singapore’s ECF scene has also picked up momentum.
The island city announced the launch of ECF operator FundedHere and crowdfunding platform Sniffr, last week. FundedHere’s platform is subject to legal approval from Monetary Authority of Singapore, hence the lack of a clear date regarding its official launch.