Proposed changes to crowdfunding rules in Singapore, announced days before the June 24 Brexit vote shook financial markets worldwide, throw into focus regulators’ challenge of balancing financial liberalisation and protecting investors seeking safety in times of turmoil.
July 18, 2016 | Michael Tee
The Monetary Authority of Singapore has relaxed its policies towards crowdfunding. Still, more can be done to protect the interests of investors. Image from Linkedin
On 8 June, the Monetary Authority of Singapore (MAS) announced it would make it easier for startups and small and medium enterprises (SMEs) to raise capital through crowdfunding platforms.
Among the changes, MAS has simplified checks on investors and will allow participation by retail investors. Previously, only Accredited Investors (AIs) – individuals with S$300,000 (US$222,000) in annual income or assets of S$2 million (US$1,475,000) excluding their primary residence, or entities with net assets of at least S$10 million (US$7,378,000) – were allowed to take part. Financial requirements for operators of securities-based crowdfunding platforms were also eased.
The changes bring the crowdfunding regime here more in line with those of developed nations.
Still, securities-based crowdfunding remains relatively nascent in Singapore, and more can be done to safeguard the interests of investors.
For a start, the definition of a retail investor or non-AI can be clearer. This can be an individual earning at least S$100,000 (US$74,000) a year, who has proven experience in investing in startups, or who is an existing member of a group certified to be involved in financial investment.
Also, more needs to be done to educate retail investors about the risks involved in crowdfunding. Simply issuing a “caveat emptor” (buyer beware) warning doesn’t cut it. While MAS has mandated that investors acknowledge they are aware of the risks involved before investing, operators of crowdfunding platforms should provide some guidance to first-time investors to give them a better idea of what they are getting into.
That said, the changes by MAS are a step in the right direction. Its requirement for all crowdfunding platforms to be licensed, for example, will give investors a greater degree of comfort.
Credit goes to the central bank, which awarded the first crowdfunding licence here in March 2016, for being nimble. This dovetails with a recent idea by MAS to allow innovators to experiment with new financial products and services using what it calls a sandbox. The idea behind this is to test potential new innovations in a relaxed regulatory environment and get them off the ground.
At a time when the world is searching for some semblance of stability amid growing uncertainties stemming from events like Brexit, MAS’s readiness to create a regulatory environment that’s conducive to capital raising and innovation is much welcomed. In today’s new economy, these initiatives will endear Singapore to entrepreneurs, companies and even investors.
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