CMI 27/2018 Controls and Disclosures to be Implemented by Licensed Securities-Based Crowdfunding Operators

What Changed

• - Licensed SCF operators must implement structured due diligence checks on issuers, including clear policies on information to be obtained, risk assessment criteria and documentation standards, and must disclose to investors the scope of due diligenc
• Lending-based SCF operators are generally prohibited from allowing a borrower to take up a new loan to repay an existing overdue loan, unless there are legitimate, documented reasons to extend a new facility before repayment of the existing loan.
• Where a lending-based SCF operator does extend a new loan to a borrower with outstanding loans, it must disclose the borrower’s total outstanding loans and the reasons for extending the new loan so investors can assess the incremental risk.
• SCF operators must establish formal policies and procedures for issuer default management, documenting circumstances under which the operator will pursue various recovery options (e.g. intensified engagement with the issuer, use of debt collection ag
• Operators must disclose to investors the different recovery options and associated costs and must seek and obtain investors’ consent before incurring any recovery-related costs that will be borne by investors.
• SCF operators are required to notify MAS immediately upon an issuer default and provide prescribed information to MAS using the relevant Annex notification form (Annex A / A1 / A2) within three business days of the default event.

Suggested Considerations

• Review existing issuer due diligence policies and procedures and update them to align with MAS’s expectations on structured checks, documentation, and investor disclosure of due diligence scope for all SCF offers.
• Implement a formal policy prohibiting the use of new loans to repay existing overdue loans, except where legitimate reasons exist; define those reasons, approval thresholds and documentation requirements for exceptions.
• Enhance lending workflows to ensure that, when new loans are extended to borrowers with outstanding loans, the platform system automatically collates and presents total outstanding exposure and the rationale for the new loan to investors in pre-investment disclosures.
• Develop and approve a detailed issuer default management framework that defines escalation triggers, recovery options, decision criteria, investor communication templates, and record-keeping requirements.
• Update investor terms and conditions and consent mechanisms so that investors explicitly agree to any potential recovery-related costs, with clear fee schedules and scenarios disclosed before costs are incurred.
• Design and implement a regulatory incident reporting process that ensures MAS is notified immediately of issuer defaults and that completed Annex A / A1 / A2 notification forms are submitted within three business days, including workflow ownership and compliance monitoring.

Key Dates

Who is Affected