Currently, there is no distinction in the regulatory treatment of managers of venture capital funds (VC Managers) and other fund managers. The Monetary Authority of Singapore (MAS) has considered the unique characteristics of VC Managers which lowers their market and business conduct risks. In particular, VC Managers typically do not trade on public markets or use leverage, and typically serve accredited and/or institutional investors. Taking such considerations into account, the MAS issued a Consultation Paper on Proposed Regulatory Regime for Managers of Venture Capital Funds on 15 February 2017 with its proposal to introduce a simplified regime for VC Managers (VC Manager Regime).
The key features of the VC Manager Regime are as follows:
- Simplified authorisation: VC Managers must meet the fit and proper criteria, but need not have directors/representatives with at least 5 years' of relevant experience in fund management;
- Reduced ongoing requirements: VC Managers need not maintain minimum based or risk-based capital requirements, and are exempt from certain business conduct requirements (e.g. in relation to independent valuation, compliance capability, internal audit, risk management, custody of assets and conflict of interests);
- Other ongoing requirements continue to apply: VC Managers must continue to comply with other ongoing requirements, including notifications to MAS in relation to changes in particulars, submission of annual declarations in relation to funds, anti-money laundering and countering terrorism financing requirements. MAS will also retain existing powers to inspect and issue directions.
To qualify for the VC Manager Regime, the VC Manager must manage funds that meet the following characteristics:
- Invest in start-ups and growth stage business ventures only: the funds must only invest in unlisted business ventures that have been established or incorporated for no more than five years at the time of the initial investment. However, the funds may participate in additional rounds of investments, so long as the initial investment meets the five years requirement;
- Be closed-end: the funds must be non-redeemable at the discretion of the investors, and must not be continuously available for subscription;
- Be offered to accredited and/or institutional investors only: the funds must be offered to end-investors who are either accredited and/or institutional investors only. Additionally, with respect to accredited investors, such investors must opt-in to accredited investor status. Please refer to our earlier newsletter issued in October 2015 concerning MAS' proposals concerning the accredited investor opt-in/opt-out regime.
New VC Managers may apply to be licensed under the VC Manager Regime. Existing fund managers who qualify for the VC Manager Regime may also operate under the VC Manager Regime, subject to a notification requirement to the MAS.
The MAS invites interested parties to submit their views and comments on the proposed VC Manager Regime by 15 March 2017.