Singapore’s central bank wants to relax VC regulations to boost startup funding

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It’s not even a week since the Committee for the Future Economy report came out, pushing for simplifying the regulatory framework for venture capital fund managers in Singapore.

Wasting nary a second, the Monetary Authority of Singapore (MAS) got on the case with a consultation paper (PDF link) containing proposals on how to do that, as part of the drive to attract more investment for Singapore’s businesses – especially startups that rely on VC capital for growth.

The change in regulations will offer startups more options and access to more capital.

As of now, VCs are governed by the same regulations as other fund managers. MAS points out that differences between them are significant enough to warrant a simpler framework. For example, the central bank mentions how VC funds invest only in unlisted ventures operating for no more than five years, do not accept new subscriptions after the close of a fund, and are usually offered only to accredited and institutional investors.

The simplified regime will free VC managers from having directors and representatives with at least five years of fund management experience. It will remove current requirements for capital and independent valuation, internal audits, and submission of audited financial statements to MAS, which all lead to increased compliance costs. It will shorten application processes as well.

That’s not to say MAS will let people run wild – it will still monitor VC managers and their CEOs and directors. VCs will still need to comply with anti-money laundering obligations, update MAS on key personnel changes, and submit regulatory updates.

A welcome change

“I would say that this is a welcomed and much needed move,” TNF Ventures investment manager Frank Lee tells Tech in Asia. Frank explains there are many investors that have shown interest in venture funding but are discouraged by setup and compliance costs. The change in regulations will offer startups more options and access to more capital.

The risk of unsophisticated investors entering the market this way is not especially concerning, Frank notes. “The MAS safeguards are there. MAS is letting go of a tight rein, not totally letting go of control,” he says, adding that the VC scene in Singapore can use the opportunity to gain more experience anyway.

“The proposed simplified regulatory regime will allow new VC managers a faster time-to-market and reduce their ongoing compliance burden,” says Lee Boon Ngiap, MAS assistant managing director for capital markets. “We hope this will attract more VC managers and spur them to play a greater role in supporting entrepreneurship and innovation.”