SGX guidelines for listed firms eyeing initial coin offerings

Listed companies planning to conduct an initial coin offering (ICO) have a new set of guidelines to follow from the Singapore Exchange.
Listed companies planning to conduct an initial coin offering (ICO) have a new set of guidelines to follow from the Singapore Exchange.PHOTO: ST FILE

Listed companies planning to conduct an initial coin offering (ICO) have a new set of guidelines to follow from the Singapore Exchange.

The move is in response to questions regarding such offerings, noted Mr Tan Boon Gin, chief executive of Singapore Exchange Regulation (SGX RegCo).

"First off the bat, it is important to make clear that even if an SGX-listed company is the issuer of a digital token, those tokens are not listed on SGX," he added in a regular column he pens.

"Therefore, SGX's rules would cover only the company and not the tokens nor the holder of the tokens."

Listed issuers intending to hold an ICO must first consult SGX RegCo and provide legal opinion on the digital tokens as well as an auditor's opinion on the offering's accounting treatment.

The SGX will also provide a checklist on compliance matters to be addressed.

When the ICO is announced, the company must include disclosures so that shareholders of the issuer are informed of the rationale for the offering and its risks.

It must also disclose what the funds raised will be used for, any impact on shareholder rights, the accounting and valuation treatments for the ICO and any financial impact on the issuer.

In addition, the company must address money laundering and terrorist financing risks.

After the ICO, SGX RegCo expects the listed issuer to keep its shareholders informed of relevant information, the development of the offering and digital tokens on a timely basis, as well as the use of the proceeds.

Meanwhile, additional measures may apply, depending on whether the digital tokens offered are construed as securities or capital market products under the Securities and Futures Act.

For instance, if the digital tokens are considered as securities, additional safeguards and procedures come into play.

"The main concern when it comes to ICOs and digital tokens that SGX RegCo has is how the issuer safeguards its own interest and that of its shareholders when it conducts an ICO," Mr Tan noted.

"The issuer's board is ultimately responsible for maintaining a robust system of risk management and internal controls when doing so."

He added that shareholders have "the right to receive clear and accurate material information on a timely basis if an issuer conducts an ICO fundraising".

"Here our responsibility as the market regulator will be to ensure relevant disclosures are made and that the information is sufficiently clear and complete for a reasonable investor to make an informed decision."

A version of this article appeared in the print edition of The Straits Times on November 21, 2018, with the headline 'SGX guidelines for listed firms eyeing initial coin offerings'. Print Edition | Subscribe