Singapore: MAS Publishes Observations From Inspection of Venture Capital Fund Managers

By Edward Bennett and Jordan Seah

Earlier this year, selected market participants were issued a report from MAS on observations from its 2022 inspection of licensed Venture Capital Fund Managers (“VCFMs”).

Having requested that MAS publish its report more widely, the circular is now publicly available here.

We summarize the key take-away for VCFMs and other fund managers in Singapore as follows:

• VCFMs are only allowed to manage “VC Funds”, focusing on VC investment.
  • VCFMs engaging in incidental activities such as providing administrative or support services to portfolio companies should remain focused on VC investing.

• VCFMs must comply with the requirements of managing only “VC Funds”, including current anti-money laundering and counter-terrorism financing regulations.
  • Some VCFMs had failed in areas relating to client documentation and client on-boarding procedures.
  • MAS stressed that operational and process matters were equally applicable to licensed fund managers in Singapore, not just VCFMs.

• Some VCFMs had failed, in breach of regulations, to inform investors in offering materials that they are not subject to the same conduct of business requirements that apply to other regulated fund managers in Singapore.

• Some VCFMs lacked formalised/written policies and/or procedures for certain operational matters and instead relied on established processes and documentations.
  • MAS strongly prefers VCFMs to codify these policies and procedures.

• Employees with responsibilities across multiple office functions, common for VCFMs given their typical size, should be aware of potential conflict of interest arising from the commingling of the firm’s business activities and control functions.
  • This can be mitigated by implementing a formal conflict management policy and segregating roles as the VCFM expands.

• VCFMs must maintain a positive base capital. Some VCFMs had negative base capital, which must be rectified to ensure compliance.