Singapore’s Monetary Authority of Singapore (MAS) has announced a simplified regulatory regime for venture capital fund managers (VCFM) in Singapore. The new rules, which came into effect on 20 October 2017, are underpinned by the continued growth in the VC market in Singapore, which itself owes much to the innovation-friendly landscape that Singapore has cultivated in recent years.
Under the new VCFM regime, provided that the funds managed by VCFM are closed ended and meet certain other criteria (see our summary table), then the managers of such funds will no longer be subject to the full scope of the competency, capital and ongoing business conduct requirements to which other licensed fund managers in Singapore are subject. Under the new regime, MAS has introduced a new category of capital markets services (CMS) licence – the CMS licence for operating as a venture capital fund manager.
MAS has recognised that given the VC business model and the fact that VCFMs will have a sophisticated investor base, MAS can adopt a less prescriptive and more flexible approach to VCFM under the new regime. The new regime removes some of the more onerous requirements on VCFMs and shifts the onus more to VC fund investors to safeguard their position contractually, rather than through wide-ranging MAS oversight.
This does not mean however that VCFM are left completely unregulated; VCFM will continue to be subject to fitness and proprietary screening of their CEO, directors, shareholders and representatives. MAS of course also retains its existing regulatory powers to deal with errant managers.
More details of the specifics of the new VCFM regime are set out in our summary table.
It is easy to see how this new regime will make life easier for existing Singapore-based VCFM, but the primary purpose is to attract new managers to set up in Singapore to support start up and growth stage businesses in the city state.
Such steps are no surprise given the proactive steps that Singapore has made in recent years to promote innovation, particularly within the technology sector, primarily in the FinTech sector.
In recent years we have seen measures taken to enhance IP protection rights, the allocation of public money to early-stage investments (see SGInnovate) and to establish a platform for FinTech collaboration and co-creation at the MAS’ Looking Glass facility.
Having taken steps to nurture a new breed of innovators, Singapore is now looking to deliver them the third party capital to develop, grow and go on to achieve great things.
Here at CMS we are greatly encouraged by these positive developments – not just for Singapore but also for the wider region, for which Singapore will continue to be a key hub. As a firm that combines deep-seated funds and investment management expertise with a leading-edge technology practice (both in Singapore and globally) CMS looks forward to working with our clients (fund managers, LPs and portfolio companies) to make the most of the opportunities presented by the new VCFM regime.
With effect from 1 September 2017, CMS is pleased to announce a formal law alliance (FLA) between its Singapore office and Singapore law practice Holborn Law LLC. The FLA operates under the name CMS Holborn Asia.