The Financial Services Commission (“FSC”), the integrated regulator for non-banking financial services and global business sectors, which is highly supportive of Fintech-related initiatives, issued on 8 April 2019, pursuant to section 7(1)(a) of the Financial Services Act 2007, guidance notes on Securities Token Offerings (“STOs”), following queries from stakeholders regarding the statutory requirements applicable thereto. An STO is 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.
The FSC considers Securities Tokens as securities as defined under the Securities Act, represented in digital format. As such, the whole gamut of securities law would apply to Securities Tokens. Therefore, when STOs are conducted in or from within Mauritius, they shall be subject to the Securities Act, and regulations made or rules issued thereunder, including the requirement for a prospectus, as may be applicable.
An STO cannot take place without the prior approval of the FSC, save where the offering is being made to sophisticated investors, expert investors, expert funds, professional collective investment schemes and specialized collective investment schemes.
The FSC further provides in the guidance notes that any person soliciting another person to enter into transactions involving Securities Tokens shall be required to hold the appropriate licence under the Securities Act 2005 and shall strictly comply with applicable regulatory requirements, including, but not limited to, adequate due diligence regarding the STOs, and accurate, timely and transparent information disclosure requirements to clients. It would therefore mean that depending on the activities being offered, investment dealers and/or investment advisers licences may be required to fully comply with the licensing requirements set out in the Financial Services Act for financial services.
Lastly, the FSC invites prospective investors to be wary of the risks prior to committing any funds for investments in Securities Tokens, in view of the high risks involved.