Mauritius Financial Services Commission Publishes Guidance on Security Token Offerings

The Mauritius Financial Services Commission (FSC) has elucidated the rules applying to companies holding security token offerings (STOs).

The FSC published guidance on April 8, saying that security tokens are classified as securities under the nation’s Securities Act 2005, only in digital form.

Therefore, issuers securing funds through STOs are mandated to apply for prior approval from the FSC, based on the guidance. On the other hand, prior approval is not required if the issue is meant for “sophisticated” or “expert” investors and funds, or professional investment schemes.

In addition, those who are soliciting others to transact in security tokens are also mandated to secure a license under the Securities Act and “strictly” follow applicable rules. The document states that failure to do so would be considered a criminal offense.

Those rules involve conduct applicable due diligence of the STO project, its team and the “rights and obligations” concerning the assets backing the tokens. STO projects should also publish disclosures, notifying customers in an “accurate, timely and transparent” manner of the risks involved.

Furthermore, the FSC warned that STOs possess a “high-risk,” and that investors are not protected by any statutory compensation arrangements in the country.

The guidance on STOs is the FSC’s second initiative for fintech firms. The watchdog introduced its first guidance on digital assets, describing them as an asset-class for “sophisticated and expert” investors.

The FSC also published final rules earlier this year for digital asset custodians, requiring them to secure a license before carrying out custody services, among other rules.