In a guidance note published on Monday, April 8, the FSC said that security tokens are securities, as defined in the country’s Securities Act 2005, but in digital form. As such, companies seeking to raise funds through an STO must obtain prior approval from the FSC and meet the disclosure and due diligence requirements.
“When STOs are conducted in or from within Mauritius, the offering of such Securities Tokens shall be subject to the Securities Act 2005 and any Regulations or FSC Rules issued thereunder including the requirement for a prospectus, as may be applicable,” reads the FSC guidance note.
However, STOs targeting “expert” and “sophisticated” investors or professional investment schemes, do not require prior FSC approval.
Furthermore, any person soliciting another person to enter into transactions involving securities tokens is required to hold an appropriate license, ensure strict compliance with the securities laws, and conduct “appropriate due diligence in view of developing a detailed comprehension of the STOs, the fitness and propriety of the management of the issuer as well as its development team and rights and obligations attached to the underlying assets backing the Securities Tokens,” reads the guidance note.
Those who fail to comply with the applicable requirements risk criminal prosecution, says the guidance, adding the caution that STOs are “high risk” and investors are not protected by any statutory compensation arrangements.
This latest is the second in a series of FSC guidance notes for fintech firms operating in the country. The first was published in September, 2018, and recognized digital assets as an asset class for “sophisticated and expert” investors.
The FSC has also issued rules for digital asset custodians, requiring them to obtain a license in order to carry out custody services.