Crowdfunding is the practice of raising capital from a large pool of individuals each for a small amount of money. This practice is gaining traction globally and Singapore is no exception. The Monetary Authority of Singapore (MAS) recently concluded on its consultation with the industry on easing the regulatory regime for these platforms. And in doing so is opening the doors to crowdfunders.
How have MAS eased the regulatory burden for crowdfunders?
In June 2016, MAS issued its response to consultation on regulatory measures and enhanced guidance for securities-based crowdfunding (SCF) which aims to make it easier for crowdfunders to raise capital for start-ups and SMEs.
The regulator has gone ahead with its proposals to reduce the base capital requirement for intermediaries, including crowdfunders, from S$250,000 to S$50,000 and has removed the requirement to maintain a security deposit with MAS of S$100,000. To ensure a level playing field, at the same time MAS has reduced the base capital requirement for licensees trading in futures contracts to S$50,000. This could prove to be a useful capital reduction for a wider population of licensees, and not just the crowdfunding community.
The regulator has simplified the process of pre-qualifying investors when making small offers of investments (defined as raising less than S$5 million within any period of 12 months). This means that SCF operators will need to ensure that potential investors have either sufficient knowledge and experience to invest in the crowdfunding opportunity or deem the investments are suitable based on their investment objective and risk tolerance. Under current requirements, both of these checks must be carried out. MAS have also published typical risk disclosure statements to use during the pre-qualifying process.
Finally, MAS has issued useful guidance on the existing advertising requirements, aimed at helping SCF operators understand their obligations and ensure investors are protected.
“Banks will continue to be the main financial institutions providing companies and individuals with a variety of financial solutions, but there will be more and more alternative providers – crowdfunding being a major part of that – offering differentiated products and addressing the needs of unbanked customers.” – Mr Pawel Kuznicki, director of P2P lending platform Capital Match (Straits Times June 2016)
How Bovill can help
We’re used to helping innovative firms do the right thing and show compliance within the rules. But what motivates us is knowing that we can do it in a way that helps you retain the vision that got your platform started in the first place.
Bovill can help crowdfunding platforms to get licensed by MAS, ensure any promotion and advertising is fully compliant and appropriate risk disclosures have been made, establish platform compliance frameworks, and provide ongoing advice after they’re licensed