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30 October, 2017
Following a consultation initiated in February 2017, the Monetary Authority of Singapore (“MAS”) has late last week moved quickly to introduce into Singapore law a new regulatory regime for fund managers who manage only venture capital funds.
This note discusses the key elements of the new regime.
Simplified Authorisation and Regulatory Regime
Venture capital fund managers (“VC Managers”) will be recognised as a distinct class of licensed fund managers. They will be required to hold a capital markets services licence for the regulated activity of fund management. However, provided that the funds which they manage meet the specified criteria, VC Managers will be largely exempt from most of the ongoing regulatory requirements that would ordinarily apply to licensed fund managers.
The specified criteria is as follows:
(a) the VC Fund must invest at least 80% of its committed capital in securities that are directly issued by an unlisted business venture and the business venture itself must have been incorporated for no more than 10 years from the time of the initial investment;
(b) the remaining 20% of committed capital may be invested in other investments;
(c) the Fund must not be continuously available for subscription, and must not be redeemable at the discretion of the investor; and
(d) all of the investors in the Fund must be accredited investors or institutional investors.
The admission criteria have been greatly simplified. While the VC Manager, its shareholders, directors, and representatives must meet the MAS Fit and Proper Criteria, and the VC Manager must continue to abide by AML/CFT requirements, most of the other requirements have been effectively lifted.
Significantly, there are also no requirements as to base capital, nor as to the minimal number of professional staff. Most ongoing conduct rules also do not apply. However, investors are required to be informed that the VC Manager is not subject to many of the regulatory requirements ordinarily imposed on other types of licensed fund managers.
The new VC Manager takes effect from 20 October 2017. Existing licensed or registered fund managers who wish to convert to the VC Manager regime are not required to undergo a new licensing process or to inform MAS of any capital reduction. They need only file a form to indicate their intention using the same form as for new entrants. Unlike new entrants who would be required to provide relevant supporting information and documents, existing fund managers need not do so.
Commentary
The new criteria for the VC Manager is considerably more liberal than what MAS had initially proposed. This certainly sends a strong signal to the financial industry that the regulator is responsive and progressive in its thinking, and no doubt would be very much welcomed.
