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The Securities Commission’s Guidelines on Social Exchange Platforms

14 October 2025

On 19 September 2025, the Securities Commission Malaysia (“SC”) issued the Guidelines on Social Exchange Platforms (“Guidelines”) which took effect immediately upon issuance.
 
The issuance of the Guidelines comes about 16 months after the Prime Minister of Malaysia, Dato' Seri Anwar Ibrahim, announced the proposal to establish Malaysia’s first social exchange during his opening address at the Global Forum of Islamic Economics and Finance (GFIEF) on 28 May 2024.1
 
The Guidelines sets out the requirements relating to the establishment and operationalisation of a social exchange platform (“SEP”) and fundraising activities by a non-profit organisation (“NPO”) for social impact projects through the SEP.
 
This article provides a summary of the main requirements set out the Guidelines.
 
A.  REQUIREMENTS RELATING TO AN SEP
 
Registration and commencement of operations
 
An applicant seeking to be registered as an operator of an SEP (“SEP operator”) must, among others, satisfy the following: 
  1. be a locally incorporated company with operations in Malaysia;
  2. consult the SC before submitting its application and provide sufficient information and documents to the SC to ensure a meaningful discussion;
  3. an applicant which is regulated by another regulator must submit to the SC an approval or no objection letter from the other regulator with its application to the SC;
  4. must have a minimum paid-up share capital of RM500,000, and at all times maintain its shareholders funds at RM500,000; and
  5. the applicant, its directors, controller2 and responsible person3 must be fit and proper4. 
An SEP operator must submit to the SC a copy of its finalised rules relating to the SEP and any fundraising exercise to be carried out through the SEP before commencing operations.
 
Directors and responsible person
 
An SEP operator must: 
  1. ensure its directors and responsible person are fit and proper and are suitably qualified;
  2. notify the SC of its appointment of a director or responsible person within a period as specified by the SC or prior to any public announcement on the appointment, whichever is earlier;
  3. ensure a director or responsible person who is no longer fit and proper vacates his office immediately; and
  4. immediately notify the SC of a director’s or responsible person’s disqualification or when the position is vacated. 
An SEP operator must at all times have at least one responsible person, whose appointment requires the prior approval of the SC.
 
The responsible person: 
  1. must be from an SEP operator’s senior management;
  2. is to be primarily responsible for the operations or financial management of the SEP operator; and
  3. must have the relevant experience in carrying out due diligence, assessment on social impact projects and fundraising or other relevant related experience. 
Any vacancy in the position of responsible person is to be filled within six months from the date of the vacancy. As an interim measure, an SEP operator must identify a person to take on and be responsible for the functions of the responsible person during the period of vacancy.
 
Obligations of an SEP operator
 
Among the obligations of a SEP operator are to: 
  1. carry out due diligence and critical assessment on the NPO and the proposed social impact project to determine whether to approve the raising of funds through its SEP;
  2. ensure the SEP is operating in an orderly, fair and transparent manner;
  3. have in place rules and procedures relating to the SEP and fundraising exercises including, among others, rules relating to the fundraising period, disclosures and reporting requirements;
  4. monitor and ensure the NPO’s compliance with the SEP operator’s rules;
  5. ensure that payments from donors through the SEP are made from an account maintained with a licensed Malaysian financial institution;
  6. ensure that its systems facilitate the direct payment of funds from donors to the NPO through the SEP;
  7. monitor the utilisation of the funds raised by the NPO is in accordance with the disclosures made in relation to the social impact project;
  8. take all reasonable measures to avoid situations that are likely to result in a direct or indirect conflict of interest with the NPO;
  9. establish and maintain controls, policies and procedures on the matters set out in paragraph 9.02(j) of the Guidelines;
  10. obtain the SC's prior approval where any proposed change in the direct or indirect shareholding of the SEP operator will result in any change in the controller of the SEP operator;
  11. notify the SC at least 14 days before effecting any change in the shareholders of the SEP operator; and
  12. immediately notify the SC of any material change to the SEP operator, NPO or social impact project including: (a) the discovery of any false or misleading statement in any disclosure in relation to the NPO or the social impact project; (b) the discovery of any material omission of information that may affect donors; and (c) any material development relating to the NPO or the social impact project. 
Any proposed rules of an SEP operator or any proposed amendments to its existing rules shall not have effect unless it has been approved by the SC.
 
An SEP operator must also comply with paragraph 9.04(a) of the Guidelines on the disclosure on its SEP of information and documents relating to an NPO and its social impact project.
 
Obligations of the board and senior management
 
The obligations of the board and senior management of an SEP operator are set out in set out in paragraphs 9.05 and 9.06 respectively of the Guidelines.
 
Risk management
 
An SEP operator must establish a risk management framework to identify, assess, monitor, control and report all material risks to which the SEP operator could be exposed. Details of these requirements are set out in paragraphs 9.08 to 9.11 of the Guidelines.
 
Reporting requirements
 
 An SEP operator must submit to the SC the following: 
  1. an annual compliance report setting out the SEP operator’s compliance with the conditions imposed by the SC pursuant to the registration of the SEP operator;
  2. its latest audited financial statements, within three months after the close of each financial year or such period that the SC may allow; and
  3. any information required by the SC on the NPO and the fundraising conducted through the SEP. 
B.  NON-PROFIT ORGANISATION
 
Fund raising requirements
 
An NPO seeking to raise funds through an SEP: 
  1. must be: (a) a locally incorporated company limited by guarantee under the Companies Act 2016; (b) an entity registered under the Societies Act 1966; or (c) an entity registered under the Trustees (Incorporation) Act 1952. In each case, the company/entity must be an approved institution, organisation or fund registered under subsection 44(6) of the Income Tax Act 1967; and 
  2. must carry out a social impact project as set out under Appendix 1 of the Guidelines, which is reproduced in the table below. 
SOCIAL IMPACT CATEGORIES
1. Social Welfare
(a) Promoting healthcare and supporting healthcare needs (including mental health) for less privileged and vulnerable communities
(b) Eradicating hunger and malnutrition for less privileged and vulnerable communities
(c) Promoting education, provision of scholarships, exhibitions, or prizes for individuals in educational, research, or similar work
(d) Supporting services for senior citizens who are less privileged and/or in the vulnerable communities
(e) Promoting livelihoods of B40, Orang Asli and other vulnerable communities for both rural and urban
(f) Promoting religious causes through the construction, improvement, purchase or maintenance of buildings for religious worship in Malaysia, and through the provision or management of related facilities and activities
(g) Promoting support for orphans, children, and those from less privileged families and vulnerable communities
2. Cultural Preservation and Heritage
(a) Protection of national heritage, art, and culture
3. Environmental Sustainability and Conservation
(a) Ensuring and promoting conservation or protection of animals
(b) Ensuring and promoting conservation or protection of the environment
(c) Disaster management, including relief, rehabilitation, and reconstruction activities
 
Board, controller and key personnel of NPO
 
An NPO’s board must, at all times, have at least two directors whose principal or only place of residence is in Malaysia. Its directors, controller and key personnel must be fit and proper at all times.
 
Operation track record
 
An NPO must have: 
  1. been in continuous operation for a minimum of three years;
  2. carried out at least 70% of its activities relating to the social impact projects;
  3. a minimum of two full-time employees at all times.
  4. a minimum annual spending of RM100,000 in the past three financial years; and
  5. received a minimum annual funding of RM10,000 in the past three financial years. 
Fundraising conditions
 
An NPO may only raise funds for a social impact project with a maximum project duration of five years. It must not utilise more than 20% of the amount raised through the SEP to fund its operating costs in managing the social impact project.
 
Segregated account
 
Funds raised by an NPO through a SEP must be properly segregated and safeguarded from conversion or inappropriate use until the social impact project is completed. An NPO is required to establish and maintain in a licensed Malaysian financial institution one or more trust accounts, designated for the monies received from donors in respect of the social impact project. It must also establish systems and controls to maintain accurate and up to date records of donors and monies received from the donors for the social impact project.
 
Disclosure requirements
 
An NPO seeking to be hosted on an SEP must disclose the information set out below in a fair, accurate and clear manner that does not contain any material information or statement which is false or misleading or from which there is a material omission, so as to enable donors to make an informed assessment on the fundraising exercise: 
  1. the objective or purpose of the fundraising exercise, including detailed information on the social impact project;
  2. detailed measurable social impact targets to be achieved in relation to the social impact project;
  3. a detailed description of the sustainability and scalability of the social impact project;
  4. a brief description of the NPO’s organisational chart, board, board of trustees (if applicable), chief executive officer (or equivalent), key personnel, advisers (if relevant) and patrons (if relevant) and their nationalities, biodata, qualifications and related experience;
  5. situations of actual or potential direct or indirect conflict of interest and actions taken to address or mitigate them;
  6. the targeted amount to be raised, including the amount allocated to fund the operating costs of the NPO, and the scheduled timeline for the use and application of the funds; and
  7. the audited financial statements for the last three financial years of the NPO. 
Utilisation of funds report
 
An NPO that has raised funds through an SEP must submit to the SEP operator a utilisation of funds report prepared on a quarterly basis containing the information set out in Appendix 2 of the Guidelines, within seven days after the end of each quarter of the financial year.
 
The report must include a confirmation that the funds raised have been utilised in accordance with the disclosures made in relation to the social impact project, and where there is a change to the utilisation of funds raised, details and reason for the change.
 
The NPO must also submit to the SEP operator a utilisation of funds report prepared on a yearly basis containing the information set out in Appendix 2 of the Guidelines, within three months after the end of its financial year, on the actual utilisation of funds. The annual utilisation of funds report must be audited by an external auditor registered with the Audit Oversight Board.
 
Social impact report
 
An NPO must submit to the SEP operator a social impact report as set out in Appendix 3 of the Guidelines, within three months from the completion of the social impact project. Where a social impact project has a duration exceeding one year, the NPO must submit the social impact report to an SEP operator on an annual basis within three months from the anniversary date of the commencement of the project.
 
External reviewer for social impact report
 
An NPO must appoint an external reviewer to verify that the social impact report is in compliance with the requirements under the Guidelines. The external reviewer must possess the relevant expertise and experience in assessing social impact projects. The external review report must be submitted to an SEP operator together with the social impact report.
 
Communication with the donors and the SEP operator
 
An NPO must ensure that there is effective, transparent and regular communication with the SEP operator and its donors. This includes providing regular updates on the progress of the social impact project and any material changes thereto until its completion.
 
Marketing and promotion
 
All information disseminated by an NPO for marketing or promotion purposes must be fair, accurate, clear and must not contain any material information or statement which is false or misleading or from which there is a material omission. The information must also be consistent with the disclosures made on the SEP in relation to the project.
 
Application for Registration
 
An NPO is required to submit to an SEP operator the relevant forms and documents as specified by the SEP operator and any other information as may be required by the SEP operator for registration.
 
Obligations of an NPO
 
An NPO must: 
  1. comply with the applicable requirements of the Guidelines at all times;
  2. ensure that all information submitted or disclosed is true and accurate and do not contain any information or statement which is false or misleading, or from which there is any material omission; and
  3. immediately notify the SEP operator and the SC of any failure to comply with any requirement of the Guidelines. 
A NPO must inform the SEP operator immediately: 
  1. where any of its directors, controller or key personnel are no longer fit and proper or have resigned or vacated their position;
  2. of changes to the board, including the basis for the changes and its implications to the NPO and the social impact project;
  3. where any litigation has been commenced or any court decision obtained against the NPO; and
  4. any other event or information that may materially affect its ability to carry out its operations or the social impact project. 
Comments
 
It will be interesting to see the response of stakeholders, such as recognised market operators and non-profit organisations, to the SC’s initiative to encourage the establishment of social exchanges as an avenue for non-profit organisations to raise funds for their social impact projects. In this day when scams abound, the requirement for an organisation to be an approved institution, organisation or fund registered under section 44(6) of the Income Tax Act 1967 sets a high, but necessary, bar for access to SEPs to protect donors from con-artists and fly-by night operators.
 
 
Article by Siti Ayenaa Binti Mohd Anis (Associate) of the Environmental, Social and Governance Practice of Skrine.
 
 
 
1 Our article on the Prime Minister’s announcement and the follow-up announcement by the then Chairman of the SC, Dato’ Seri Dr. Awang Adek Hussin, on the proposed social exchange can be accessed here. A social exchange pilot programme (SEPP25) involving five non-governmental organisations was launched in January 2025. Our alert on this pilot programme can be accessed here.
2 The expression “controller” has the meaning provided in section 60(7) of the Capital Markets and Services Act 2007 and refers to a person who (a) is entitled to exercise, or control the exercise of, not less than 15% of the votes attached to the voting shares in the holder; (b) has the power to appoint or cause to be appointed a majority of the directors of such holder; or (c) has the power to make or cause to be made, decisions in respect of the business or administration of such holder and to give effect to such decisions or cause them to be given effect to.
3 The responsible person must be from an SEP operator’s senior management and be primarily responsible for the operations or financial management of the SEP operator. The responsible person must also be the main contact person for liaising with the SC and perform any duty as directed by the SC (paragraphs 8.06 and 8.09 of the Guidelines).
4 The fit and proper criteria are set out in Appendix 5 of the Guidelines.

This article/alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.

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