MAS tweaks rules for securities crowdfunding
CROWDFUNDING platforms that currently use a promissory note exemption to reach retail investors will have to obtain licences to continue operating, the Monetary Authority of Singapore (MAS) announced yesterday.
But existing rules will also be tweaked to make it easier for licensed securities crowdfunding platforms to tap the retail market, the financial markets regulator said.
It is estimated there are about 10 debt crowdfunding platforms in Singapore right now, such as MoolahSense and Capital Match, that help businesses to borrow money from retail investors.
Some platforms can operate without capital market services licences because they make use of an exemption for promissory notes that are worth at least $100,000, are issued to a single issuer and mature within a year.
The workaround used by some platforms is to consolidate funds from multiple borrowers into a single entity to cross that $100,000 hurdle.
But MAS said that the workaround goes against the intention of the rule, which was to reduce the burden on good-credit borrowers trying to meet short-term financing needs from sophisticated investors.
MAS will therefore seek a legislative amendment to remove the exemption for promissory notes. Crowdfunding platforms that wish to continue helping companies to raise business loans from retail investors will thereafter have to be licensed by MAS.
But MAS will also make it slightly easier for licensed operators to reach retail.
The regulator will streamline existing rules that exempt offers of less than $5 million from having to issue prospectuses. While companies and intermediaries that wanted to make use of the exemption currently have to ensure that investors have the knowledge, experience, suitability and financial means to invest in securities crowdfunding, under the new rules investors just have to demonstrate knowledge, experience or suitability.
The financial means criteria will be dropped in favour of a beefed up risk disclosure and assessment framework.
THE BUSINESS TIMES