In February 2017, MAS issued a consultation setting out plans to significantly streamline the licensing and ongoing regulatory regime for Venture Capital (VC) Manager in Singapore. Following feedback from industry, MAS implemented the new VC regime on 20th October 2017.
Fund Managers managing funds that meet all of the following eligibility criteria are in scope:
- Each fund must invest at least 80% of committed capital in securities directly issued by unlisted business ventures. Those ventures must have been incorporated for 10 years or less at the time of initial investment. The remaining capital must be invested in other unlisted ventures.
- The funds must be closed-ended; that is, not continuously available for subscription after the final close. And investors able to redeem only at the end of the fund life.
- They must be offered only to investors (including employees) that are Accredited Investors or Institutional Investors.
Licensing process and conditions
MAS has made the licensing process more expeditious for VC Managers – currently it can take around 3 months for RFMCs (longer for LFMCs). Existing FMCs that meet the eligibility criteria can submit Form 1V to switch to the new regime.
Further, a number of the existing licensing conditions have disappeared, removing many significant barriers to entry. Two of particular note are the base capital requirement of S$250,000, and the need for directors and representatives to have at least five years’ experience in fund management.
Some of the current ongoing regulatory requirements have been disapplied for VC Managers, significantly reducing the cost of compliance:
- The requirement to have in-house compliance capability
- The internal audit requirement
- The need for assets under management to be subject to independent valuation and reporting to investors
- The disclosure and management of conflicts of interest
- Putting in place a risk management framework
- Examination requirements, and
- The submission of annual audited accounts to MAS.
The ongoing requirements that will remain in place
MAS is keen to ensure that Singapore’s VC sector remains clean and sound. To this end, the following ongoing requirements for fund managers remain:
- The fit and proper criteria, which apply to directors, representatives, substantial shareholders, the CEO, and the FMC itself
- The need for at least two Directors, one of which must be full-time and resident
- To have two resident, full-time professionals (Representatives), which can be Directors
- Certain notifications to the Regulator, including changes in shareholdings
- The anti-money laundering requirements contained in Notice SFA04-N02, and
- An annual declaration to MAS confirming that they continue to meet the criteria to benefit from the VC Regime, along with other data such as AUM.
Further, MAS will retain its powers to inspect VC Managers, and to take regulatory actions such as revoking the FMC’s status.
The need for a robust compliance framework has therefore not disappeared – albeit, much of the detail is likely to be led by investors’ expectations rather than those of MAS.
How we can help
We can help new fund managers to obtain authorisation under the VC Regime and to put in place a compliance framework which meets the expectations of both MAS and of investors.
We can also provide assistance to existing VC FMCs who wish to benefit from the Regime to streamline their compliance frameworks in a way which keeps both MAS and investors happy.