Increase in complaints on unlisted firms seeking to raise funds from public: SC

KUALA LUMPUR – Securities Commission Malaysia (SC) has reminded unlisted public companies (UPCs) seeking to raise funds from the public to comply with the Capital Markets and Services Act 2007 (CMSA) and relevant guidelines, especially when the offer is made to retail investors.

In a statement today, the regulator said it has received an increasing number of queries and complaints pertaining to UPCs offering their shares, including preference shares, to both retail and sophisticated investors.

In certain cases, the shares are marketed or offered through phone calls, followed by one-on-one meetings with agents of the UPCs.

Under CMSA, a prospectus must be issued when shares of a UPC are offered to retail investors, said SC.

“The said prospectus will also need to be registered with SC. UPCs are not required to issue a prospectus only when the shares are issued wholly to sophisticated investors, as described or set out under Schedules 6 and 7 of CMSA.

“Sophisticated investors include high-net-worth individuals (with a net asset threshold of RM3 million, excluding the value of their primary residence), high-net-worth entities and accredited investors.”

It also reminded UPCs that offering shares to retail investors without a prospectus is a serious breach under CMSA, and a person found liable may be punished with a fine not exceeding RM10 million, or imprisonment not exceeding 10 years, or both.

While the act does not mandate the issuance of an information memorandum (IM), UPCs that issue an IM for offering their shares to sophisticated investors are required to deposit the said IM to the regulator.

“UPCs are also expected to make clear in the IM that while the IM is deposited with SC, SC’s approval is not required for the offering of the shares referred to in the IM,” said the statement.

SC said UPCs have a duty to provide all relevant information to investors, including sophisticated investors, to enable them to make an informed assessment, including the merits of investing in the shares concerned and the extent of the risks involved.

“Before investing in shares of a UPC, investors should ask for and review the contents of the registered prospectus or IM to understand the nature and risks of their investment, especially how it will be utilised by the UPC.

“They should also conduct their own research and, where necessary, seek professional advice.” – Bernama, January 26, 2021