Singapore govt to give faster approvals, lower requirements for venture capital managers

Though venture capital investment in Singapore has been reported to grow at healthy rate, the government believes that “there is room” to further expand its size and scope

The Monetary Authority of Singapore (MAS) today announced a proposal to simplify authorisation process and regulatory framework for venture capital (VC) managers in a consultation paper.

“The proposed simplified regulatory regime for VC managers recognises the lower risks they pose, given their business model and sophisticated investor base. It will allow new VC managers a faster time-to-market and reduce their ongoing compliance burden. We hope this will attract more VC managers and spur them to play a greater role in supporting entrepreneurship and innovation,” said Lee Boon Ngiap, Assistant Managing Director, Capital Markets, MAS.

The proposal aims to focus primarily on fitness and propriety assessment while retaining regulatory powers “to deal with errant VC managers”.

Under the new proposal, MAS will not demand VC managers to have directors and representatives with at least five years of relevant experience in fund management. It will also remove base capital and risk-based capital requirements, and will not require VC managers to provide independent valuation, internal audits and audited financial statements.

Even though so, other requirements such as annual submission of information on funds, as well as money laundering and terrorism financing prevention, will remain unchanged.

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At the status quo, VC managers are subject to the same regulatory frameworks as other fund managers. However, several characteristics of VC managers have made the regulation less relevant for them, such as the investing in unlisted business ventures operating less than five years and not accepting new subscription after the close of the fund.

According to a press statement, the VC industry has been growing at a healthy rate, but the proposal was made as the government believes that “there is room” to further expand the size and scope of VC funding available for startups.

According to a Bloomberg report, the plan is part of efforts to support and implement recommendations from a top-level government-appointed committee that are aimed at sustaining Singapore’s growth at an average of two to three per cent annually.

The report also stated that Singapore is taking steps to address a lack of technology initial public offerings (IPOs) on its stock exchange. Last week, the Singapore government appointed a committee that recommends dual-class stock to be allowed.

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Industry players such as ACP Managing Partner Sameer Narula welcomed the proposal, stating that the consultation paper could have “far reaching implications” on the way early stage investment is conducted in Singapore and around the region.

“For example, with no requirement to maintain base capital, it will be much easier for smaller fund managers to compete in the market. Ultimately making it more competitive, and offering more funding options to early stage companies,” Narula said.

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