P2P Financing Platform Operators License In Malaysia

The Securities Commission Malaysia (SC) announced on 5th July 2018 that it is inviting parties interested to operate equity crowdfunding (ECF) or peer-to-peer (P2P) financing platforms to submit applications for registration with the SC. Applications must be submitted to the SC latest by 7 September 2018.

As at June 2018, the SC has registered seven ECF operators and six P2P financing operators. These platforms have benefited more than 300 micro, small, and medium enterprises (MSMEs) to raise a total of RM118 million capital through more than 1,000 successful campaigns.

The salient points of the licensing guidelines are as follows:

·        All P2P operators must be locally incorporated and have a minimum paid-up capital of RM5 million.

·        A P2P operator must establish systems and controls for maintaining accurate and up-to-date records of investors’ monies held.

·        A P2P operator must carry out investor education programmes.

·        The P2P operator must ensure that investors’ monies are properly safeguarded from conversion or inappropriate use by its officers.

·        The P2P operator must have in place processes to monitor anti-money laundering requirements.

·        The P2P operator must have in place processes or policies to manage any default by issuers including using its best endeavours to recover amount outstanding to investors

·        Only locally registered sole proprietorships, partnerships, incorporated limited liability partnerships, private limited and unlisted public companies, will be allowed to be hosted on the P2P platform.

·        The following entities are prohibited from raising funds through a P2P platform:

o   Commercially or financially complex structures (i.e. investment fund companies or financial institutions);

o   Public-listed companies and their subsidiaries;

o   Companies with no specific business plan or its business plan is to merge or acquire an unidentified entity (i.e. blind pool);

o   Companies that propose to use the funds raised to provide loans or make investment in other entities.

·        Will the IT systems utilized in the operationalization of the P2P market be proprietary/ off-the-shelf/ outsourced? (If outsourced, please specify arrangements and how you will ensure it meets the requirement in the Guidelines).

Of those currently operating, 51% of market share of fund raised (Nov 2016 – Jan 2018) is held by Funding Societies, a partner of MP Capital Advisory Sdn. Bhd.  Default rates are minimal and reflects the stringent process followed.