Case Study: VCFM License Advisory Supporting Venture Capital Market Entry in Singapore

Background on Case Study VCFM License

A management investment firm was to develop a venture capital fund management platform in Singapore so as to assist with early and growth-oriented investments. In its market entry approach, the company realized that it needed to be registered as a Venture Capital Fund Manager (VCFM) in the regulatory framework of Singapore as administered by the Monetary Authority of Singapore (MAS).

Although the company possessed good experience in investments and strategy in venture capital, it was not well conversant with the particular regulatory needs that applied to registration of VCFM. The management realised that despite the fact that the VCFM regime is aimed to be leaner than the other fund management licences, it also demands firms to present suitable governance, risk consciousness, and operating preparedness.

To facilitate this process, the firm hired our VCFM Licence Advisory Services to help it with the registration process in a systematic, effective, and regulator friendly fashion.

Issues and Challenges

Some of the challenges that were presented during VCFM registration are typical of firms venturing into the Singapore venture capital ecosystem.

The limitation and scope of the VCFM regime was one such challenge. The company had to be clear about the eligibility requirements, authorized activities, and the regulatory requirements that it had to keep up with to make sure that its business model fitted into the VCFM model.

The other challenge was documentation preparedness. Although the VCFM regime has less stringent requirements than other licences, MAS demands a clear record of governance arrangements, investment processes and risk management practices. These were areas that the firm needed to formalise and not to overcomplicate.

Another issue that the firm encountered was the problem of proving organisational substance. VCFMs in MAS need to possess proper staffing, well defined responsibility, and efficient control despite a minimalist regulatory environment. It was important to make sure that these elements were well spelt out.

Lastly, there was the issue of management in regard to the execution risk. The submissions may be incomplete or unclear, which might slow down the registration or lead to subsequent queries, which might change the schedule of the funds launch and capital utilization.

Objectives

The main task of the engagement was to assist the firm in the successful registration as a Venture Capital Fund Manager in Singapore.

In particular, the company strived to:

• Know MAS VCFM eligibility requirements and regulatory requirements.
• Integrate its business model and investment strategy with the VCFM framework.
• Arrange convincing and proper registration records.
• Put in place governance and operation models that suited a VCFM.
• Processing the registration of MAS with ease and comfort.

The advisory services had to be rendered in proportion, practical, and in line with the venture capital environment.

How We Helped

Our VCFM license position took a more regulator-compliant and structured method of approach that would be cross-compliant with operational realities.

We were introduced through a VCFM preparedness test. We had examined the investment strategy suggested by the firm, structure of the fund and the organisational structure in order to ensure that it was consistent with the VCFM eligibility requirements.

According to this evaluation, we came up with an effective registration roadmap that identifies major steps, documentation, and timelines. This gave the management a viable idea of how the VCFM registration process works and manage expectations.

We assisted the company in making and perfecting the key documentation, such as the governance strategies, investment decision making protocols, conflict management policies, and risk knowledge procedures. The documents were customized to the operating model of the firm and were in line with the MAS expectations.

We also helped in the organisation of organisational roles and responsibilities. This involved explaining the roles of directors, senior management staff and control mechanisms and recording reporting and supervisory mechanisms.

We also facilitated the preparation of VCFM registration forms and submissions as part of the registration process. Clarity, consistency and completeness was underlined to minimise the chances of regulatory follow up.

During the process, we collaborated with the management to translate requirements of regulatory requirements into a practical context and assist in the process of making informed decisions. It revolved around inculcating regulatory consciousness in the operations of the firm.

Value Delivered

This interaction shows that professional VCFM licence advisory service could assist the venture capital firms to set up operations in Singapore.

Our services enabled the firm to improve governance, demarcate regulatory lines, and operational preparedness by assisting in the systematic and regulator-appropriate structure of the VCFM registration. Another advantage of the registration preparation process was that it enhanced internal knowledge of the regulatory duties that were being undertaken.

The advisory framework that VCFM developed as a result of this engagement was an excellent base on which compliant and learn sustainable venture capital activities can be conducted in the Singapore regulatory framework.