Unlisted public companies need to comply with SC's guidelines and laws

KUALA LUMPUR – The Securities Commission Malaysia (SC) today reminded unlisted public companies (UPCs) seeking to raise funds from members of 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.

The SC has received an increasing number of queries and complaints about 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 UPC. The CMSA requires a prospectus to be issued when shares of UPC are offered to retail investors. It said prospectus will also need to be registered with the SC.

“Furthermore, UPCs are not required to issue a prospectus only when the shares are issued wholly to sophisticated investors described or set out under Schedules 6 and 7 of the CMSA. Sophisticated investors include high net worth individuals (with a net asset threshold of RM3 million, excluding the value of the primary residence), high net worth entities and accredited investors,” the SC said in a statement.

Moreover, the SC wishes to remind UPCs that offering of shares of retail investors without a prospectus is a serious breach under the CMSA and a person found liable may be punished with a fine not exceeding RM10 million or imprisonment not exceeding ten years, or both.

“Besides that, while the CMSA does mandate the issuance of an information memorandum (IM), UPCs that issue an IM for the offering of their shares to sophisticated investors are required to deposit the said IM with the SC,” it said.

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

UPCs have to prove all relevant information to investors, including sophisticated investors, to enable them to make an informal assessment, including the merits of investing in the shares of the UPCs and the extent of the risks involved.

“To sum up, before investing in the 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 their investments will be utilized by the UPC. They should also conduct their research and where necessary, seek professional advice,” the SC concluded.