The Singapore Exchange cautions investors that rules on initial coin offerings done by SGX-listed firms cover only the firms themselves, and not the tokens they issue. 

Investors who have questions about regulatory obligations of listed companies doing initial coin offerings (ICOs) now have some answers, as the Singapore Exchange (SGX) recently issued guidelines for them.

«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.  Therefore, SGX's rules would cover only the company and not the tokens nor the holder of the tokens,» said Tan Boon Gin, chief executive of Singapore Exchange Regulation (SGX RegCo) in a column posted on «Regulation Asia». 

Listcos Must First Consult SGX RegCo

Listed issuers that intend to carry out an ICO are first expected to consult SGX RegCo. As part of the process, they must provide legal opinion on the digital tokens as well as an auditor's opinion on the ICO's accounting treatment. The SGX will also provide a checklist for the listed issuer to look into compliance matters that needs addressing.

«To facilitate the consultation process, we require the listed issuer to provide legal opinion on the nature of the digital tokens as well as its auditor’s opinion on the ICO’s accounting treatment. The opinions should come from reputable professional firms,» added Tan.

Disclosures Required

Upon announcing an ICO, the listed firm must also include the following disclosures so that shareholders are well informed:

  • 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.

Working With Auditors and Updated Laws 

The listed issuer must also come to an agreement with its statutory auditors on the scope of the audit which should provide assurance that the ICO has been properly accounted for in their financial statements, and that associated risks have been adequately addressed and milestones for usage of funds have been adhered to, added Tan.

Most importantly, the listed firm has to carry out checks to address money laundering and terrorist financing risks as Singapore recently passed laws for stiffer penalties in these areas, as reported by «Channel News Asia».