SC Issues Guidelines to Launch Malaysia’s First Social Exchange

Introduction

On 19 September 2025, the Securities Commission Malaysia (SC) issued the Guidelines on Social Exchange Platforms, a regulatory framework that paves the way for the launch of Malaysia’s first social exchange. This development marks a significant evolution in how the capital markets can support social impact and community-driven initiatives.

A New Frontier in Fundraising

Traditionally, capital markets have served for-profit ventures, but the Social Exchange Guidelines open the door for non-profit organisations (NPOs) to access capital through regulated, transparent means. The social exchange will be a digital platform allowing NPOs to raise funds for eligible social impact projects. It is designed to instil public trust by introducing detailed disclosure obligations, strict oversight, and outcome-based reporting requirements. This aligns closely with the broader sustainability and inclusion objectives under the 13th Malaysia Plan.

Key Features of the Guidelines

The Guidelines establish a dual regulatory focus: on platform operators, and on NPOs themselves. Social exchange platform (SEP) operators must meet minimum financial thresholds, appoint fit and proper directors and responsible persons, and demonstrate adequate risk management and cybersecurity protocols. They are responsible for due diligence on NPOs, monitoring compliance, and enforcing rigorous disclosure standards.

For NPOs, eligibility hinges on local incorporation and approval under the Income Tax Act. NPOs must also demonstrate operational track records, restrict operational overheads to 20% of funds raised, and maintain segregated trust accounts. Importantly, they must submit quarterly and annual Utilisation of Funds Reports as well as Social Impact Reports, all of which are subject to independent audit or external verification.

Enabling ESG and SDG-Driven Impact

The Guidelines mandate that funded projects fall under recognised social impact categories, including healthcare, education, disaster relief, and environmental conservation. This ties directly into ESG investing principles and the United Nations Sustainable Development Goals. By facilitating traceable and measurable social impact, the social exchange is poised to elevate the standard of corporate-NPO engagement and redefine how philanthropy and private capital converge.

Governance and Enforcement

The SC retains significant oversight powers under the Capital Markets and Services Act 2007. It may impose directions, require removal of key personnel, or withdraw registrations for non-compliance. Importantly, all representations made by NPOs must include disclaimers that the SC does not endorse any fundraising project. This is designed to avoid the risk of reputational misalignment or public misunderstanding.

Conclusion

Malaysia’s Social Exchange Guidelines represent a landmark step towards embedding integrity, accountability, and transparency into the third sector’s fundraising ecosystem. The framework strikes a careful balance between regulatory control and innovation, providing non-profits with new financial pathways while safeguarding donor interests.