FundedHere’s ‘private stock exchange’ for startups in limbo as regulatory issues emerge

The FundedHere team at FundedX’s launch / Photo credit: FundedHere

Just days after crowdfunding firm FundedHere unveiled FundedX, its planned private stock exchange for startups, it’s putting the brakes on the project.

FundedHere had earlier indicated it “obtained prior regulatory approval” from the Monetary Authority of Singapore (MAS) in the form of a capital markets service (CMS) license, which it said allowed it “to deal with securities.”

But the company said on Thursday night it is “factually incorrect” to state that FundedX can operate as an exchange under the CMS license, and the company will have to get a different license to move forward with the project.

In an emailed statement, FundedHere said that FundedX will need to be authorized as either an “approved exchange” or a “recognized market operator” (RMO) by MAS before it can begin operating.

FundedHere had claimed in that earlier statement that FundedX is “merely” a “matching platform” where buyers and sellers can register their interest to buy or sell company stock ad hoc at pre-determined prices, as opposed to a securities exchange, which runs continuous trading.

At FundedX’s press launch, FundedHere’s co-founder and executive director Daniel Lin clearly branded the platform as a private stock exchange for high-growth startups, adding that the company’s CMS license allows FundedX to deal with securities, and buy and sell shares in private companies.

Regulatory approval is likely to take some time

On MAS’s website, there are a total of four approved exchanges and 36 RMOs registered with the central bank. The approved exchanges are Asia Pacific Exchange, Ice Futures Singapore, and derivatives and securities trading platforms run by the country’s main stock exchange, the Singapore Exchange (SGX).

Registered RMOs include the main stock exchanges of Hong Kong, Japan, and Australia. Brokerage firm BGC Partners and commodity futures platform Cleartrade Exchange, can also be found on the RMO list.

A MAS spokeswoman told Tech in Asia: “An entity that operates a platform to facilitate secondary trading of securities is required to be an approved exchange or a recognised market operator under the Securities and Futures Act.”

They added, “Such an activity [secondary trading of securities] is not covered by a CMS licence. A CMS licence is required for activities such as providing brokerage, corporate finance advice, or fund management to customers.”

A platform that is similar to FundedX is 1exchange (1x), which facilitates the trading of shares of private companies and is backed by SGX and investment syndication platform CapBridge.

1x, which made the announcement to launch a private stock exchange in June this year, is currently going through the application process for a RMO license, said CapBridge’s CEO Johnson Chen.

“We fully expect and intend to be compliant and support the development of the capital markets in Singapore,” Chen said.