MAS to simplify rules for venture capital funds, easing start-ups' access to funds

The Monetary Authority of Singapore published a consultation paper lining out its proposals for a simplified authorisation process and regulatory framework for venture capital managers.
The Monetary Authority of Singapore published a consultation paper lining out its proposals for a simplified authorisation process and regulatory framework for venture capital managers.PHOTO: ST FILE

SINGAPORE - Venture capital (VC) funds will soon be regulated under a slimmer framework, as regulators seek to ease start-up firms' access to funding. 

The Monetary Authority of Singapore published on Wednesday (Feb 15) a consultation paper lining out its proposals for a simplified authorisation process and regulatory framework for these VC managers, which are now subject to the same rules as other fund managers. It plans to implement the new rules later this year.

MAS hopes the simplified regime will attract more VC managers here and spur them to play a greater role in supporting entrepreneurship and innovation, its assistant managing director of capital markets, Mr Lee Boon Ngiap, said in a statement.

"The proposed simplified regulatory regime for VC managers recognises the lower risks they pose, given their business model and sophisticated investor base," said Mr Lee. "It will allow new VC managers a faster time to market and reduce their ongoing compliance burden."

MAS noted that VC managers are different from other fund managers as they manage funds that are typically invested only in unlisted business ventures and they do not accept new subscription after the close of a fund, with redemption only available at the end of the fund's life. 

Furthermore, VC funds are offered only to accredited and/or institutional investors.

These differences make some fund management rules that are currently imposed on VC managers less relevant, the MAS said.

And so MAS has proposed to shorten and simplify its authorisation process for VC managers, focusing primarily on the criteria of fitness and propriety.

That is, it will study, for example, whether the VC funds' directors have a criminal record or any adverse regulatory records. 

This will shorten the authorisation process for VC managers from an average of about two months to a matter of weeks. 

Other criteria will be dropped. Unlike the case for fund managers, MAS will not require VC managers to have directors and representatives with at least five years of relevant experience in fund management. 

New and existing VC managers will also no longer be subject to the capital requirements and business conduct rules that currently apply to fund managers in general. 

The existing base capital requirements and risk-based capital requirements will also be removed for VC managers. 

They will also no longer have to meet the current requirements for independent valuation, internal audits and submission to MAS of audited financial statements. 

Nonetheless, MAS said that VC managers, their directors and key officers must continue to meet fit and proper requirements and comply with anti-money laundering obligations. 

MAS will also retain regulatory powers to deal with errant VC managers. 

A copy of the public consultation paper is available on the MAS website. The public consultation ends on March 15.