The jurisdiction has set out plans to make venture capital a more vibrant sector.

Singapore’s financial regulator has set out ideas on how to make the Asian city-state a venture capital powerhouse by cutting back on red tape. 

A consultation paper is being issued by the Monetary Authority of Singapore. Under its proposed new system, the MAS will not demand that VC managers have directors and managers with at least five years of relevant experience; new VC managers could expect a much shorter application process, the MAS said in a statement this week.

The jurisdiction is in competition with rivals such as Hong Kong to encourage VC, which is an incubator of future business and also a source of high net worth entrepreneurs in the future. 

MAS said its proposed simplified regime accounts for the extent of contractual safeguards that already exist in typical fund management contracts negotiated by VC managers’ sophisticated investor base.

At present, VC managers are regulated in the same way as other fund managers even though, in the case of the former, they typically only hold unlisted, young firms, do not accept new money after the close of a fund, and are usually only offered to accredited investors and/or institutions.

The base capital requirements and risk-based capital requirements that apply to VC managers in Singapore will be removed under the proposed new regime, MAS said. The requirement for independent valuation, internal audits and submission to MAS of audited financial statements will not be imposed, it said.

“The proposed simplified regulatory regime for VC managers recognises the lower risks they pose, given their business model and sophisticated investor base. It will allow new VC managers a faster time-to-market and reduce their ongoing compliance burden,” said Lee Boon Ngiap, assistant managing director, capital markets, at MAS.

One factor that can help dictate the success or otherwise of venture capital is how many private firms are floated on the stock exchange, thereby giving VC investors an exit. Last year, Hong Kong set the hottest pace for IPOs (see here). However, Singapore's fortunes improved last year. Fundraising via IPOs in Singapore hit $1.7 billion (S$2.43 billion) last year, up fivefold from 2015 when it slumped to its lowest since 1998 (source: Thomson Reuters data, Straits Times).

In Hong Kong's case, it was reported that Prime Minister Lee Hsien Loong has given approval to dual-class shares and other measures proposed by a panel to drive economic growth. The city-state’s stock exchange this week started a public consultation (source: Bloomberg).