11/6/2016

FrequentlyAskedQuestionsonthePeertoPeerFinancing(P2P)FrameworkSecuritiesCommissionMalaysia|SecuritiesCommissionMalaysia

Legislation&Guidelines
FrequentlyAskedQuestionsonthePeertoPeerFinancing(P2P)Framework
Updated as of 3 November 2016
1.

GENERAL

1.1 How is SC regulating P2P in Malaysia?

As part of SCs effort to nurture and facilitate marketbased innovation in FinTech under
the aFINity@SC initiative, the regulatory framework for equity crowdfunding (ECF) was
introduced in February 2015.Continuing on the initiatives, SC has introduced the
regulatory framework for P2P, setting out requirements for the registration and
obligations of a P2P operator as provided in the revised Guidelines on Recognized
Markets (the Guidelines) in May 2016.
The introduction of the new Chapter 13 in the Guidelines also provides for the type of
issuer and investor who can participate in P2P.
The P2P framework will enable eligible businesses and companies to access market
based financing to fund their projects or businesses via an electronic platform.
1.2

How does P2P work?

P2P operator facilitates businesses or companies to raise funds from both retail and
sophisticated investors through an online platform. Considering that the primary
objective of introducing marketbased financing is to help build small businesses which
in turn help to spur and promote growth of the economy, hence the P2P operator is not
permitted to facilitate individuals seeking personal financing.Through the SC registered
P2P platform, an investor may invest in an investment note or an Islamic investment
note issued by businesses or companies for a specified tenure with the expectation of a
predetermined financial return.

1.3

How does an investor invest through P2P?

The process for investing through a P2P platform may differ from operator to operator
depending on the rules set by the operators.In general, upon understanding and
analysing the information disclosed by issuers concerning its business, financing
purpose and financial information credit assessment repayment schedule and risk
information published on the P2P platform, an investor will then make an informed
decision on the issuers and amount they wish to invest in.
For example, Issuer X issues an investment note which seeks to raise RM100,000. The
investment note is rated A with a rate of return 0.5 per cent per month for a 12month
period.
Therefore, the investor that chooses to invest in Issuer X in such amount he so decides,
he will receive monthly repayments (principal and returns) for the duration of the
investment note.

1.4

How does an issuer raise funds through P2P?

https://www.sc.com.my/faq_p2p/

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FrequentlyAskedQuestionsonthePeertoPeerFinancing(P2P)FrameworkSecuritiesCommissionMalaysia|SecuritiesCommissionMalaysia

When an issuer applies for funding, the P2P operator will evaluate the issuers
suitability, among others, by assessing its capacity to repay through credit history
checks and analysis of any alternative data. These factors allow the P2P operator to
assess and assign a risk score to the investment note or Islamic investment note issued
by such issuer. Such issuance will then be hosted on the P2P platform where investors
will then select and invest accordingly.
2.0

APPLICATION

2.1

Has the P2P framework been implemented?

The new P2P framework came into effect on 2 May 2016 in which application to be
registered as a P2P operator was opened till 1 July 2016.

2.2

Will SC accept any application submitted after 1 July 2016?

At this juncture, the application closing date remained on 1 July 2016, however, any
opening to the registration process will be subject to our regulatory review from time to
time. Relevant communication will be made on any future opening of application.

2.3

Do applicants need to pay any fees when submitting an application to SC to be

registered as a Recognised Market Operator?
When applying to SC to be registered as a Recognised Market Operator, the applicant
has to attach a payment of RM5,000 together with its application.

3.0 P2P OPERATORS

3.1

Who can operate a P2P platform?

A P2P operator must be a body corporate incorporated under the Companies Act 1965
with a minimum paidup capital of RM5 million.A prospective P2P operator must be able
to demonstrate to SC that it is able to satisfy the relevant criteria as mentioned in the
Guidelines. Among others, the SC must be satisfied that the operators directors are fit
and proper it is able to operate an orderly, fair and transparent market having the
requisite IT infrastructure and ensure that there is an efficient and transparent risk
scoring system in place.
Further, it must also demonstrate that it is able to manage risks associated with its
business and operation including having processes and contingency arrangement in the
event it is unable to carry out its operations.

3.2 What are the obligations of a P2P operator?

Among others, a P2P operator must be able to determine the suitability of issuers to be
hosted on the platform. This includes conducting background checks on the prospective
issuers to ensure its fit and properness, verify its business proposition and carry out
assessment on its creditworthiness.A P2P operator must also ensure compliance of its
platform rules which are approved by SC and make available all the relevant information
to the investor.
In addition, a P2P operator must ensure that monies obtained from investors and
issuers are placed in a third party trust account until the appropriate disbursements are
required to be made. A P2P operator must also have in place processes to manage any
default by issuers including using its best endeavours to recover amount outstanding to
investors.
https://www.sc.com.my/faq_p2p/

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3.3

FrequentlyAskedQuestionsonthePeertoPeerFinancing(P2P)FrameworkSecuritiesCommissionMalaysia|SecuritiesCommissionMalaysia

Are there any additional obligations imposed for the offering of Islamic investment notes
on a P2P platform?
Yes. A P2P operator must also comply with Chapter 11 as well as paragraph 13.11 of
the Guidelines for the offering of Islamic investment notes on its platform.

4.0

ISSUERS

4.1 Who are the eligible issuers?

Only locally registered sole proprietorships, partnerships, incorporated limited liability
partnerships, private limited and unlisted public companies, are allowed to be hosted on
a P2P platform.
4.2 How much can an issuer raise on P2P platform?
There is no limit imposed by the SC on the amount of funds that may be raised by an
issuer on a P2P platform. However, the amount of funds that may be raised on the P2P
platform or the rate of financing will depend on the outcome of the issuers risk scoring
conducted by the P2P operator.
4.3

Is an issuer allowed to keep the funds raised on P2P platform if it is less than the target
amount?
An issuer is allowed to keep the funds raised on a P2P platform provided that he has at
least raised 80 per cent of the target amount.Example:
Issuer X sought to raise RM100,000 on a P2P platform, but received offers amounting
to RM80,000. Issuer X is allowed to retain the RM80,000 as it meets the 80 per cent
minimum threshold.

4.4

Is an issuer allowed to keep the funds raised on P2P platform if it exceeds the target
amount?
An issuer is not allowed to keep any amount which exceeds the target amount.Example:
Issuer X sought to raise RM100,000 but received offers totalling RM110,000. He can
only retain up to RM100,000. The P2P operator will return the monies or reject the
additional offers, as the case may be, in excess of the target amount, in accordance
with its rules.

4.5

Can an issuer be hosted concurrently on multiple P2P platforms?

An issuer can only be hosted concurrently for different purposes on multiple P2P
platforms. However, the issuer is required to disclose to the P2P operator its intention to
seek funding from other P2P operators concurrently.

5.0

INVESTORS

5.1

Who can invest in an investment note or Islamic investment note which is executed or
offered on or through a P2P platform?
P2P investment opportunities are open to all investors. Retail investors are encouraged
to limit their investments exposure on any investment note or Islamic investment note
executed or offered on or through a P2P platform to a maximum of RM50,000 at any
one time in order to manage their risk exposure. However, retail investors should be
aware and cautious of the risks of investing in investment note or Islamic investment
note beyond the advised RM50,000 threshold.

https://www.sc.com.my/faq_p2p/

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5.2

FrequentlyAskedQuestionsonthePeertoPeerFinancing(P2P)FrameworkSecuritiesCommissionMalaysia|SecuritiesCommissionMalaysia

Does the SC mandate any coolingoff period for investments made on a P2P platform?
The SC does not mandate any coolingoff period for investments made on a P2P
platform. However, P2P operators have the discretion to provide a coolingoff period for
investors on their platforms.

5.3

What information are investors entitled to obtain on a P2P platform?

The P2P operator is obliged to make available on its P2P platform relevant information
pertaining to the issuers such as key characteristics of the issuers, purpose of the
fundraising, its business plan and financial information.In addition, information on its
general risk warnings, appropriate risk disclosure of issuers, risk scoring mechanism,
criteria for determining a default, processes to manage a default, and information on late
payment and default rate of issuers hosted on its platform will also be made available
on the P2P platform.
Further, all fees, charges and other expenses relating to the investment must be
disclosed by the P2P operator.

5.4

What happens when there is a complaint or dispute regarding the investment?

A P2P operator must have in place processes for complaints handling or dispute
resolution. Such information must also be made accessible to all investors.

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