The Mauritius financial services watchdog has issued a guidance note for the Security Token Offering (STO) industry. The Financial Services Commission (FSC) stated in the note that securities tokens are categorized as securities under the country’s Securities Act of 2005.
The note stated that 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.”
No STO shall be issued without the prior approval of the commission, the note said. However, no prior approval will be needed for STO issuers that offer their tokens to expert investors, professional investment schemes and expert funds.
Individuals that solicit others to invest in STOs must obtain a license from the commission. Operating without this license will be considered a criminal offence. Such individuals must also adhere to a strict set of securities laws. The first of these is undertaking due diligence regarding the STOs. The individual must “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.”
He must also practice full disclosure, providing his clients with all the information relating to the STO. This information must include the risks associated with Securities Tokens.
The regulator concluded by reminding investors of the risks involved in investing in STOs:
“Given their high-risk nature, the FSC urges all prospective investors to fully ascertain the related risks prior to committing any funds for investment in Securities Tokens. In addition, the FSC hereby informs investors that any investment in Securities Tokens is at their own risks and that they are not protected by any statutory compensation arrangement in Mauritius.”
Mauritius has been very progressive with the crypto industry. The Indian Ocean island nation recognized cryptos as an asset class in September 2018. Shortly after, it sought to consult with the industry stakeholders to find the best way forward. As revealed in the note by the FSC, stakeholders have been sending lots of queries to the commission regarding the issuance of STOs which was what necessitated the guidelines.
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