MAS proposes new Regulatory Regime for managers of VC funds
The MAS is consulting on proposals to implement a simplified authorisation process and regulatory framework for managers of venture capital (VC) funds.
As part of the broader efforts of the Monetary Authority of Singapore (MAS) to promote financing for enterprise development, on 15 February 2017 the MAS published a consultation paper proposing a simplified authorisation process and regulatory framework for managers of venture capital funds (VC managers).
The proposed simplified regulatory regime for VC managers (VC Manager Regime) recognises the lower risks they pose, given their business model and sophisticated investor base.
A brief summary of the proposals is set out below:
| Proposals | Details |
| Criteria |
VC managers must only manage funds that meet the following characteristics: (i) be directly invested in unlisted business ventures that have been established or incorporated for no more than five years at the time of initial investment (ii) be closed-end, and (iii) be offered only to end-investors who are either “accredited investors” or “institutional investors”. |
| Simplified authorisation |
VC managers that meet the proposed criteria for the VC Manager Regime will need to apply and be licensed by the MAS prior to business commencement. The application will require the particulars of the VC manager, its substantial shareholders, chief executive officer, directors, representatives, and a clear description of its proposed VC fund(s) and activities to be carried out in Singapore. However, the MAS will not impose admission criteria on VC managers to have directors and representatives with at least five years of relevant experience in fund management. The MAS will still require all VC managers to meet the MAS’ fit and proper criteria relating to financial soundness, honesty and integrity and reputation. |
| Exemptions from certain ongoing requirements |
The MAS will not impose the following requirements which currently apply to fund managers: (i) Capital requirements:
(ii) Business conduct requirements: Not mandatory for VC managers to satisfy the MAS that they have:
(iii) Independent annual audit of the fund manager: VC managers will not be required to submit annual audited financial statements and auditor reports to the MAS. The MAS will apply all other ongoing regulatory requirements that are applicable to fund managers to VC managers, including: (i) Notification to the MAS: VC managers must notify of changes to its particulars previously submitted to the MAS, its substantial shareholders, CEO, directors and representatives within 14 days of the change, and when the VC manager intends to cease regulated activity. (ii) Annual declaration to the MAS: VC managers will have to report annually to the MAS their funds under management, number and types of investors, fund types and deals by geography and sector, and confirm in writing to the MAS that it continues to meet the proposed criteria under the VC Manager Regime. (iii) Anti-money laundering and countering the financing of terrorism (AML/CFT) requirements: VC managers will need to put in place robust and effective controls to detect and deter the flow of illicit funds through Singapore's financial system. VC managers will also be required to keep abreast with AML/CFT announcements, and adhere to amendments to the AML/CFT requirements. (iv) The MAS’ powers to inspect and issue directions: The MAS will retain its existing powers to inspect and investigate VC managers, issue directions or impose conditions on VC managers, revoke the regulatory status of any VC manager, and issue prohibition orders against the CEO, directors or representatives of VC managers. |
A comparison of the proposed VC Manager Regime against the existing regime for fund management companies is set out below:
| Requirements | Proposed VC Manager Regime | Current regime for fund management companies (licensed and registered) |
| Authorisation by the MAS prior to commencement of fund management, including meeting the MAS’ fit and proper criteria and having presence in Singapore | Applicable | Applicable |
| Base capital thresholds and risk-based capital requirements | Not applicable |
|
| Requirements in respect of the conduct of business in fund management | Exemptions from certain requirements | Applicable |
| Requirement to have independent annual audit | Not applicable | Submission of an auditor’s report and audited financial statements to MAS annually |
| Submission of annual regulatory returns to the MAS on funds managed and investors | Applicable | Applicable |
| Prevention of money laundering and countering the financing of terrorism | Applicable | Applicable |
| Annual fees payable | S$4,000 |
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Once the VC Manager Regime is implemented, new VC managers can expect a much simplified and expeditious authorisation process.
Existing fund managers managing VC funds are required to notify the MAS that it meets all the proposed criteria, and obtain the MAS’ acknowledgement of the notification, before they can operate under the proposed new VC manager regime. Alternatively, existing fund managers can choose to maintain their current regulatory status and be subject to the full set of ongoing requirements, even if they meet all the proposed criteria to qualify for the VC Manager Regime.
