The FSC published regulatory guidance on security token offerings (STOs). In the guidance, the FSC clarified that security tokens are classed as securities as defined in the Securities Act 2005, represented in digital form.
The FSC added:
“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.”
The guidance also states that Regulators of security tokens are required to get prior approval of the FSC.
However, no prior approval is required for several categories of investors, such as "sophisticated" or "expert" investors, expert funds as well as professional and specialised collective investment schemes.
Further, the guidance stipulates that anyone soliciting others to transact in security tokens should hold the appropriate licence under the Securities Act and will be "required to ensure, at all times, strict compliance with the applicable regulatory requirement".
These rules include undertaking adequate due diligence regarding the STO, such as "the fitness and propriety of the management of the Regulator and providing "accurate, timely and transparent information" on the project.
The FSC stressed that carrying out financial services without a licence is a criminal offence.
The watchdog said that the guidance was issued in response to the queries from stakeholders regarding the statutory requirements applicable to STOs in Mauritius.
In an additional note, the regulator warned about the "high-risk nature" of STOs, urging investors to review potential risks before investing any funds in STOs, and reminding investors that they are not protected by any statutory compensation arrangements in Mauritius.