• The MAS Is Reviewing Regulations for Venture Capital Fund Managers
  • January 17, 2017 | Author: Mark See
  • Law Firm: Duane Morris & Selvam LLP - Singapore Office
  • A venture capital fund manager planning to operate in Singapore will typically apply to the Monetary Authority of Singapore (“MAS”) to register as a registered fund management company (“RFMC”). To qualify, it needs to meet two criteria: (1) to have no more than 30 qualified investors, of which no more than 15 may be funds or limited partnership fund structures; and (2) it must manage assets with a total value not exceeding S$250 million.

    Otherwise, the venture capital fund manager will need to be a licensed fund management company (“LFMC”) to operate, which has stricter qualification criteria.

    Notwithstanding that the RFMC approach has a lower eligibility criteria than those for LFMCs, its requirements are still onerous. The application process, which can be unwieldy, typically takes six to 12 months.

    On 24 August 2016, the Today Newspaper reported that the MAS was reviewing its regulatory policy framework for venture capital firms, with the aim of improving funding availability for financial technology startups. The story mentioned a number of problems facing the existing framework, including funding gaps, the absence of licensing fast-tracking (through regional governmental collaborations) and the current complicated and expensive procedures for setting up an RFMC.

    On 11 November 2016, The Straits Times reported that the MAS is examining how to significantly simplify and shorten the authorisation process for new venture capital fund managers. The rationale for doing so is the role that venture capital firms play in helping to drive entrepreneurship and innovation in Singapore and the region. According to The Straits Times, the MAS will hold a public consultation on the proposals in January 2017, with changes possibly introduced by July 2017.

    The Straits Times also reported that the MAS will consider the possibility of exempting venture capital fund managers from standard business conduct requirements applicable to asset managers in general, provided that they already have in place robust safeguards for investors.

    This is an important development, given the drive to develop Singapore’s growing startup ecosystem, the number of venture capital firms that have been entering Singapore in recent years and Singapore’s importance for private equity deals in the region.

    According to the Singapore Venture Capital Association and Preqin 2016 Factsheet on ASEAN Private Equity Deal Activity, Singapore was a hub for private equity investments in 2015, with Singapore-based investors accounting for more than 50 percent of investments into the region. The Factsheet also reported US$28.5 billion assets under management of Singapore-based private equity and venture capital fund managers in 2015.

    A liberalisation of the RFMC requirements will likely help make Singapore an even more attractive home for venture capital fund managers.