The Singapore Exchange has published a list of its expectations of listed companies that intend to raise funds using digital token sales.
In a post published on its official website on November 15, the exchange revealed that while it is not interested in passing judgement on the commercial benefits of investment value of ICOs and cryptocurrencies, companies are required to liaise with Singapore Exchange Regulation (SGX RegCo) before launching ICOs so as to enable shareholders to make informed decisions.
Legal Opinions and Shareholder Education
The note, which was signed by SGX RegCo CEO Tan Boon Gin stated that firms looking to launch ICOs must provide legal and auditor opinions on the nature of the digital asset in question and its accounting treatment. If further specified that at the point of announcement, ICO issuers must declare certain information so as to appraise shareholders of the fund raising.
An excerpt from the note spells out the information to be provided to shareholders:
“The rationale for, and risks (including operational, cyber security, manipulation, legal and reputational risks) arising from, the ICO;The use of funds raised and key milestones to be achieved in utilising the funds; “Know-your-customer” checks to be conducted to address money laundering and terrorist financing risks; The accounting and valuation treatments for the ICO; The use of existing issuer funds to conduct the ICO, if any; The financial impact on the issuer as a result of the token issuance as well as impact of any contingent settlement provisions; Any impact on existing shareholders’ rights; and Any other information as SGX RegCo thinks necessary.”
In addition, issuers are also required to obtain an agreement with statutory auditors providing assurances that the ICOs financial statements are in good order and that funds have been used for the purpose they were allocated for.
Special Measures for Security Tokens
SGX further revealed that token sales that are classified under “securities/capital markets products” under Singapore’s Securities and Futures Act (SFA) will be required to meet prospectus registration requirements for securities offers as well as SFA-mandated securities dealer licensing requirements. In addition, such issuers may be rrequired to carry out the ICO through a subsidiary.
According to SGX RegCo, it is not in a position to make investment judgement on crypto-related products, but it nevertheless has to act to protect its own interests and that of shareholders. Ultimately the regulator said, the responsibility for maintaining an effective risk management system lies with the token issuer’s board. Continuing in a similarly hands-off tone, SGX RegCo concluded with an appeal to companies to consult with it for more clarity, stating that effective regulation is possible only when there is regular communication between all stakeholders.
This comes at a time when Singapore is becoming recognised as an increasingly crypto-friendly jurisdiction. Earlier in November, CCN reported that SGX and the country’s central bank successfully developed a smart contract-powered Delivery versus Payment (DvP) mechanism for settlement of tokenized assets over different blockchain platforms.