Company's plan to issue securities tokens blocked, after failing to fully comply with regulations
SINGAPORE — The Monetary Authority of Singapore has warned a company looking to issue securities tokens as part of its initial coin offering (ICO) not to proceed with its plans, because it failed to fully comply with regulatory requirements.
Securities tokens function like other forms of securities, such as stocks and bonds, so they come with certain rights and obligations, and are regulated under the Securities and Futures Act (SFA).
In a media statement on Thursday (Jan 24), the central bank said that the company intended to rely on an exemption under the SFA, which allows a company to issue securities to accredited investors without registering a prospectus with MAS.
An accredited investor is an individual who has at least S$2 million worth of personal assets and whose income over the last one year is at least S$300,000. Or it could be a company which has at least S$10 million in assets.
MAS did not name the company in its statement but TODAY understands that it is educational technology firm Jules Corporation.
Four days after MAS' press release (Jan 28), Jules Corporation CEO Jonathan Chan put up a statement on the company's website, saying that it has "never issued nor intended to launch an ICO". It also claimed that it "never offered any securities in Singapore", and "had not at any time been in breach of the regulatory requirements" contained in the SFA. "Our fund raising plans were never halted or suspended by the MAS," Mr Chan said.
He added that after the company put up a LinkedIn post in August last year, MAS was "concerned that if a subsequent offering of securities was made, the post could be construed as an advertisement". According to him, MAS assisted the company to fully comply with the SFA. And in late December last year, his company informed the central bank that it was "pausing our fund raising because of the then negative market sentiments". "The MAS subsequently invited us to keep them informed should we decide to offer any securities in Singapore," he said.
WHAT THE COMPANY DID
- Jules Corporation failed to comply with the advertising restriction that comes with the exemption.
- Under the SFA exemption, there are certain conditions, for instance, companies are not allowed to advertise their offering to the public.
- The firm’s legal advisers put out a LinkedIn post calling attention to the offer and it was accessible to the public.
- After MAS’ warning, the firm voluntarily took down the LinkedIn post.
- It suspended its global offering of securities tokens.
WHY THERE IS AN ADVERTISING RESTRICTION
- Companies looking to skip the process of registering a prospectus with MAS cannot market their services to mom-and-pop or retail investors.
- Only MAS-registered companies offering securities can have mom-and-pop investors as their clients.
- Only accredited investors, who tend to have more financial resources, are able to buy securities from companies not registered with MAS.
WHAT IS AN ICO?
- It is a method for companies to raise funds through the sale of digital tokens.
- Similar to the offering of shares when a company goes public in an Initial Public Offering (IPO)
- The difference is that companies looking to have an ICO can bypass the costs and regulatory requirements that come with an IPO, which includes the evaluation of its financial performance, the drafting of a prospectus and scrutiny from regulators.
MAS SAYS…
- Consumers should understand the benefits and risks of any product before parting with their monies.
- Digital token offerings carry risks such as a highly speculative valuation, heightened risk of fraud and lack of a proven track record.
