MAS Consults on Proposed Regulatory Regime for Managers of Venture Capital Funds

In mid-February, the Monetary Authority of Singapore (“MAS”) released a Consultation Paper on Proposed Regulatory Regime for Managers of Venture Capital Funds (P004-2017, February 2017) (the “Consultation Paper”). 

Current Regulation of Venture Capital Fund Managers

Under current law, venture capital fund managers (“VC Managers”) who pool and manage monies from third party investors must register with MAS as a Registered Fund Management Company (“RFMC”).  If a VC Manager has more than S$250 million in aggregate assets under management, or serves more than 30 accredited investors (“AIs”) or institutional investors (“IIs”), they must hold a Capital Markets Service (“CMS”) licence for fund management.  To qualify either as an RFMC or a CMS licensee, a VC Manager must satisfy a number of stringent criteria, including minimum base capital, track record, experience of principals, and compliance and audit capabilities.

Proposed VC Manager Regime

In the Consultation Paper, MAS proposes to simplify the regulatory regime for VC Managers.  MAS’s fundamental assumption underlying its proposal is that VC Managers who meet certain criteria (discussed below) pose significantly less risk to the financial system and therefore do not require the same level of regulation as other RFMCs and CMS licensees.

To qualify for the VC Manager Regime, MAS proposes that a VC Manager must manage only funds that are:

1.    Invested in unlisted businesses that have been established for 5 years or less at the time of initial investment.  The ‘initial investment’ qualification will enable a VC Manager to make certain ongoing investments in portfolio companies that are older than 5 years without becoming disqualified under this Regime.

2.    Closed-end.

3.    Offered only to AIs and IIs.

To register with MAS under the proposed Regime, a VC Manager satisfying the criteria above must also meet MAS’s fit and proper criteria for financial soundness, honesty and integrity, and reputation.  Importantly, MAS proposes not to impose minimum capital standards or business conduct requirements such as internal compliance and audits, independent fund valuations, and management of conflicts of interest.

Registered VC Managers would need to submit annual declarations regarding their funds, investors, and deals, and would need to comply with anti-money laundering requirements, but would not be required to submit audited financial statements or auditor reports to MAS.  The proposed annual registration fee is S$4,000.

Other details concerning the proposed VC Manager Regime are set out in the Consultation Paper.  The Consultation Paper solicits public comments on the proposed VC Manager Regime.  If you would like to submit comments directly, the Consultation Paper and supporting materials can be found here: Consultation Paper on Proposed Regulatory Regime for Managers of Venture Capital Funds.  The comment period closes on 15 March 2017.