UNLISTED public companies (UPCs) seeking to raise funds from members of the public have been reminded by the Securities Commission (SC) to comply with the Capital Markets and Services Act 2007 (CMSA) and relevant guidelines especially when the offer is made to retail investors.
In this regard, the SC 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 UPC,” the SC’s media statement pointed out.
Recall that In April 2019, ACE Holdings Bhd, an investment company, was made to return RM814 mil to its investors who subscribed to its private placement undertakings in September 2015 and January 2018.
In a statement back then, the SC said ACE Holdings has made an unconditional redemption offer to all investors who subscribed to the two private placements.
The unconditional redemption offer by ACE Holdings came after the SC sanctioned the company relating to provision of false or misleading information in its private placement memorandums (PPM) dated Sept 8, 2015, and Jan 5, 2018.
Elaborating on its latest warning, the SC said the CMSA requires a prospectus to be issued when shares of a UPC are offered to retail investors. The said prospectus will also need to be registered with the SC.
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 net asset threshold of RM3 mil, excluding the value of primary residence), high net worth entities and accredited investors.
“The SC wishes to remind UPCs that offering of shares to 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 mil or imprisonment not exceeding 10 years or both,” warned the market regulator.
While the CMSA does not mandate the issuance of an information memorandum (IM), the SC said UPCs that issue an IM for offering of their shares to sophisticated investors are required to deposit the said IM with the SC.
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 the 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 of the UPCs and the extent of the risks involved,” noted the SC.
Before investing in shares of a UPC, the SC reminded investors to request and review the content of the registered prospectus or IM to understand the nature and risks of their investment, especially how their investments will be utilised by the UPC.
They should also conduct their own research and where necessary, seek professional advice. UPCs can refer to the Prospectus Guidelines for the required information that must be included in a UPC prospectus for the purpose of registration with the SC.
Members of the public who have any enquiries or concerns about any person or company offering any shares in a UPC may contact the SC’s Consumers and Investors Department at tel +603-6204 8999 or e-mail [email protected].
