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MAS simplifies regulations for securities-based crowdfunding platforms

Among other changes, the central bank will be simplifying checks on investors and reducing financial requirements for platform operators, in an effort to improve companies' access to securities-based crowdfunding while enhancing investor safeguards.

SINGAPORE: Upcoming regulatory changes will make it easier for startups and small and medium enterprises (SMEs) to raise funds on securities-based crowdfunding platforms, the Monetary Authority of Singapore (MAS) announced on Wednesday (Jun 8).

In a statement, MAS said it is simplifying checks on investors and reducing financial requirements for platform operators, in an effort to improve companies' access to securities-based crowdfunding while enhancing investor safeguards.

The authority added that it would simplify the pre-qualifications for investors that meet certain requirements on financial competence. These pre-qualifications currently allow issuers raising less than S$5 million within 12 months to do so without having to issue a prospectus.

As a safeguard for investors, MAS will require platform operators to document and disclose the key risks of securities-based crowdfunding investments and obtain investors’ acknowledgement that they have read and understood these risks, the authority said. 

MAS is also reducing the financial requirements for platform operators who want to raise funds through securities-based crowdfunding only from accredited and institutional investors to be licensed as dealing intermediaries, as long as they do not handle or hold customer monies, assets or positions, and do not act as principal against their customers.

Both the base capital requirement and the operational risk requirement will be reduced from S$250,000 to S$50,000, while the S$100,000 security deposit will be removed. This will allow more platform operators to operate in this "restricted space" and takes into account the limited systemic and business conduct risks posed by such intermediaries, the authority said.

In addition, the central bank will publish new guidelines on securities-based crowdfunding-related advertising and answers to frequently-asked questions on lending-based crowdfunding.

MAS Capital Markets Assistant Managing Director Lee Boon Ngiap noted that while securities-based crowdfunding is a "useful addition" to Singapore's financial landscape, such investments can be risky.

"The measures we are implementing seek to strike the right balance, between improving access to securities-based crowdfunding for startups and SMEs and protecting investor interests," Mr Lee said.