Singapore Halts STO for Regulatory Breach

The Monetary Authority of Singapore (MAS) announced on January 24th that it had halted an unnamed security token offering. The MAS stated that it had disqualified the STO from an exemption whereby the issuer could sell its security to accredited investors without registering a prospectus with the authority. The issuer violated the condition of the exemption granted under the Securities and Futures Act (SFA) that bars it from advertising the offer.

The Monetary Authority of Singapore said in its statement: “The exemption from prospectus registration is however subject to certain conditions, including a requirement not to advertise the offer. The issuer, in this case, failed to comply with the advertising restriction when its legal advisers put out a LinkedIn post accessible to the public calling attention to the offer. As such, the issuer would not be able to rely on the exemption from prospectus registration. Following MAS’s warning, the issuer has suspended its global offering of securities tokens.”

Lee Boon Ngiap, MAS’s Assistant Managing Director (Capital Markets) said, “Where an offer is made to the public, a prospectus is required to ensure that investors are provided with all the information to make informed investment decisions. Some offers may be made without a prospectus if they are limited to a restricted group of persons or to those who have the means to look after their own interests. Such offers are subject to strict conditions such as advertising restrictions. MAS will not hesitate to act if issuers contravene the disclosure requirements under the SFA.”

Within the statement, MAS took the opportunity to remind investors about the highly speculative nature of investing in ICOs and STOs, “Consumers should ensure that they understand the benefits and risks of any product or service before parting with their monies. Specifically for digital token offerings, the risks include a highly speculative valuation, heightened risk of fraud, and lack of a proven track record.”

The MAS further advised investors, “Check on the company, its owners, directors, and management members to assess if the opportunity is genuine. Confirm the company’s and representatives’ credentials by using available resources, including the Financial Institutions Directory, Register of Representatives and Investor Alert List on the MAS website.”

The MAS referred investors to its A Guide to Digital Token Offerings, updated in November 2018, for more information on investing in security tokens.  The Monetary Authority of Singapore is both the country’s central bank and its chief financial regulator.