Risk Mitigating Measures that We Have Taken
We understand that investing in startups and SMEs are inherently riskier vis-a-vis investing in public listed companies. However, at 1X, we believe investing can be made less risky for investors like you.
We have carefully thought through the investor journey and have designed various safeguard measures to offer more protection for you as an investor. For example:
(a) Eligibility to list on our platform
One of the first things we do in safeguarding your interest as an investor is to ensure that only companies that meet certain minimum standard can list on our platform. This way, you as an investor can have assurance that companies listed on our platform meet a certain standard in terms of operating track records and financial positions.
Listing eligibility criteria that companies are required to meet includes:
• the Company must have raised prior share capital of more than SGD 4 million OR the Company’s revenue in the trailing 12 months must be more than SGD 2 million;
• the Company must have at least 2 years’ of operating history
• the Company must have working capital of more than 12 months
(b) Solvency of companies listed on our platform
As the failure rate may be higher for start-ups and SMEs, we have instituted the following requirements in our Rules in order to minimise the chances that investors buy into an insolvent company:
Prior to issuer being granted eligibility to list on our platform
• the Company must be a going concern
• the Company must not have any impending legal or financial disputes or claim
Prior to listing, the Company must
• represent and warrant that it is a going concern;
• represent and warrant that it possesses working capital to fund at least 12 months of operations;
• represent and warrant that the Company is not aware of any encumbrances in its common or ordinary shares held by the SPV
Post-listing
• Immediate disclosure on any winding up, liquidation, receivership or judicial management,
• Immediate disclosure on JV and M&A
• Annual declaration that it is a going concern and it has working capital for at least next 12 months.
(c) Liquidity of Securities
To mitigate the risk of low/no liquidity, we have put in place listing eligibility criteria in the Rules that requires the company to hold more than 5% of the shareholding of the company on a fully diluted basis, and that the shares in the company held by the SPV must be valued at minimum of USD 3 million.
(d) Information flow
We understand you as an investor will need information to make important investment decisions. Inherently, disclosure of information by private companies can be very limited. In order to bridge the information gap often found in private companies, we have required companies listed on our platform to meet certain minimum disclosure standards, which includes the following:
(i) latest audited financial statements for the financial year
(ii) changes in substantial and controlling shareholding
(iii) appointment or cessation of director and key executive
(iv) quarterly representation by the company’s CFO on the company’s going concern
(v) share issuance
(vi) JV, M&A
(e) Trading and settlement
At CapBridge, in order to minimise the likelihood that buyer or seller cannot deliver on their buy and sell order, we have instituted a manual process whereby Trustee and Escrow Agent are involved in checking to ensure that seller has the shares to sell, and buyer has made the payment for its purchase.
On top of that, the process also entails manual checks with Trustee on whether any adverse information about the issuer (e.g. liquidation of the Issuer) is made known to the Trustee. This process aims to minimise the chances that the buyer buys into a company that is undergoing liquidation.
It is important to note that the above manual process to check with Trustee and Escrow Agent are done on a best effort basis, and is not in any way a guarantee that the risks described in the Risk Disclosure section are eliminated. For example, if Trustee is not informed by Issuer of its winding up (even though the Rules requires the Issuer to do so), the Trustee in this manual check process may not flag out the event to us.
Delisting
Our Rules also cater for the situation of delisting of issuers from our platform. In the event of delisting, our Rules requires a third party independent financial advisor to provide an independent valuation and requires a cash offer to be made to the holders of securities in the company listed on our platform. Furthermore, in the case where a cash offer is not made, our Rules requires that an alternative offer must be proposed and subject to approval of 90% of the holders.
Regulatory Architecture in Singapore
Singapore is an established global financial centre and a key financial hub in Asia Pacific. Factors such as a sound economic and political environment, and a reputation for integrity and strict enforcement against crime and money laundering, have contributed to Singapore’s success as an international financial centre. On the regulatory front, Singapore’s financial sector is regulated by the Monetary Authority of Singapore.
Type of Investors
Recognising the higher risk of investing in private and growth companies, only certain categories of investors may use our trading platform. The rationale is that these investors are better able in terms of financial and other resources to seek their own professional advice and conduct the necessary due diligence prior to making any investment decision.
If you are an investor in Singapore, you must be an accredited investor, expert investor or professional investor in order to access trading on 1X.
1. “accredited investor” has the same meaning as prescribed under section 4A(1)(a) of the Securities and Futures Act (Cap. 289) (“SFA”).
2. “expert investor” has the same meaning as prescribed under section 4A(1)(b) of the Securities and Futures Act (Cap. 289) (“SFA”).
3. “professional investor” means any of the following–
• a bank that is licensed under the Banking Act (Cap. 19);
• a merchant bank that is approved as a financial institution under section 28 of the Monetary Authority of Singapore Act (Cap. 186);
• a finance company that is licensed under the Finance Companies Act (Cap. 108);
• a company or society registered under the Insurance Act (Cap. 142) as an insurer;
• the Singapore Government;
• a statutory body established under any Act in Singapore;
• the Government of Singapore Investment Corporation Pte Ltd;
• a pension fund;
• a collective investment scheme, as defined under section 2(1) of the SFA
• a holder of a capital markets services licence under the SFA;
• a person who is exempted from the requirement to hold a capital markets services licence to carry on business in dealing in capital markets products that are securities, units in a collective investment scheme or specified exchange-traded derivatives contracts under paragraph 2(l)(a) of the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations (Rg 10) (“SF (LCB) Regulations”);
• a person who is exempted from the requirement to hold a capital markets services licence to carry on business in fund management under paragraph 5(l)(i) of the Second Schedule to the SF (LCB) Regulations, and who has assets under its management of not less than S$15 million;
• a headquarters company or Finance and Treasury Centre which carries on a class of business involving fund management but only to the extent that the business in fund management has been approved as a qualifying service in relation to that headquarters company or Finance and Treasury Centre under section 43E(2)(a) or 43G(2)(a) of the Income Tax Act (Cap. 134), as the case may be;
• a company in the Global Trader Programme of Enterprise Singapore;
• a financial adviser licensed under the Financial Advisers Act (Cap. 110) who uses 1X’s services solely for the purposes of trading for its own account; or
• a hedge fund that has assets under management of not less than S$15 million.
We have taken the above measures to mitigate risks but there is no assurance that the described or other risks will not materialise. You should seek independent professional advice if you do not fully understand the risks of investing through our Platform.
