MAS proposing simpler rules for venture capital funds
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SINGAPORE — In a bid to attract more venture capitalists (VCs), including those from the United States and Europe, the Monetary Authority of Singapore (MAS) announced yesterday that it would relax regulations for VCs and simplify the authorisation process. The central bank’s proposals include lower requirements for VC funds and faster approvals, in a broad move to promote financing for enterprise development.
MAS will waive some requirements to reduce unnecessary compliance costs and administrative burden. These include the removal of base capital requirements and risk-based capital requirements, as well as requirements for independent valuation, internal audits and submission to MAS of audited financial statements.
Under the proposed changes, MAS will focus primarily on fitness and proprietary assessment of the VC managers. “The authorisation process for a fund manager licence now takes around two-and-a-half months on average. After the proposed changes, a VC manager may be able to get his paperwork done in just a few weeks,” an MAS spokesperson said.
There were 131 private equity and VC managers licensed in Singapore as of 2015, of which 19 are VC managers, according to the 2015 Singapore Asset Under Management Survey. As of today, there are 29 VC managers.
VC managers welcomed the changes, adding that the relaxation of rules would attract more VCs to set up in Singapore. “I would certainly expect that with more venture capital available, more funding would be available for Singapore firms. A spillover effect is that many companies across the region would more seriously consider basing their headquarters in Singapore,” said Dr Jeffrey Chi, chairman of Singapore Venture Capital and Private Equity Association.
The move will help start-ups benefit from a wider pool of VC funding. Mr Lee Boon Ngiap, assistant managing director, capital markets at MAS said: “We hope this will attract more VC managers and spur them to play a greater role in supporting entrepreneurship and innovation.”
Experts noted that the lowered requirements does not equate to increased risks to the investment scene here, or lead to higher risks to crime.
“VC investors are sophisticated and are seen as accredited investors. The changes don’t change much for them (because) the investors look at who is running the fund … we don’t see the changes as posing higher risks at all,” said Chia Tek Yew, head of financial services advisory, KPMG in Singapore.
Existing safeguards continue to apply to VC managers under the regime, such as the rule to comply with anti-money laundering obligations, the requirement to “be fit and proper”, and the need to submit periodic regulatory updates to the MAS.
The central bank will retain regulatory powers to inspect and investigate the VC managers, issue directions or impose conditions on them, as well as issue prohibition orders against CEO and directors of VC managers. The public consultation will last until March 15, and changes are slated for implementation by July this year.
