On 8 April 2019, the Financial Services Commission ("FSC"), which is the regulator for non-banking financial services and global business sectors, published a guidance note, entitled 'Securities Token Offering' (the "Guidance Note"). This is the FSC'S second guidance note under its Fintech Series with a view of promoting Fintech-related initiatives in Mauritius. This second Guidance Note which states the regulatory approach of the FSC in relation to offerings of securities tokens, follows the FSC guidance note of September 2018 on recognition of digital assets as an asset-class for investment by Sophisticated and Expert Investors. In the same breath, the FSC issued at the beginning of the year, rules on digital asset custodians.
The Guidance Note establishes securities tokens as securities in digital format. As a result, all regulations regarding the offering of securities are now extended to securities tokens. A security token offering means the issue of securities tokens as a method of raising funds from investors, in exchange for the ownership or economic rights in relation to assets. Security token offerings conducted in or from within Mauritius are now regulated by the FSC and are accordingly subject to the Securities Act 2005 (the "Act") and any regulations or FSC rules issued thereunder. For instance, any person who makes an offer of securities tokens to the public in or from Mauritius will be required to have in place a prospectus in the form imposed by the Act and the Securities (Public Offer) Rules 2007, and such prospectus must be registered with the FSC prior to being distributed.
This also means that any offer for securities tokens for which a prospectus is not required under the Act will be regulated by the relevant FSC rules governing such exempted offer such as the Securities (Preferential Offer) Rules 2017 will govern offers of securities tokens made by way of private placement or to sophisticated investors.
An important consideration under the Guidance Note is the need for prior approval of the FSC for an offering of the securities tokens which is not necessarily applicable to an offer of other securities. The Guidance Note sets out the requirement for an issuer to apply for the approval of the FSC before making an offer of securities tokens, unless where the offer is made to sophisticated investors, expert investors, expert funds, professional collective investment schemes and specialised collective investment schemes.
In addition, only persons licensed as an investment dealer or investment adviser or investment banker (conducting activities as an investment dealer or investment adviser) may solicit other persons to enter into transactions involving securities tokens.
The Guidance Note has brought much needed clarity around the statutory requirements applicable to securities tokens offerings.
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