MAS can be bolder in making changes to equity crowdfunding rules

ON FEBRUARY 16, 2015, the Monetary Authority of Singapore (MAS) published a consultation paper proposing changes to the current securities-based crowdfunding (SCF) regulatory regime. MAS recognises the benefit of crowdfunding as an alternative financing source for startups and small and medium enterprises (SMEs). However, it is also aware of the risks, such as high capital loss, lack of liquidity, fraud and platform failure. To strike a balance, it has proposed tailoring the regulatory framework to facilitate offers of securities to accredited and institutional investors via online crowdfunding platforms.

The term "accredited investors" generally refers to high net worth individuals of income over S$300,000 or with assets over S$2 million. Institutional investors include banks and finance companies.

A notable exclusion from the proposed new framework is the retail investor. MAS is "mindful that retail investors may not fully appreciate the high risks inherent in SCF investments, even if risk warnings are disclosed", and hence, has proposed to limit participation in SCF to the select group of accredited and institutional investors (AI investors) first, while adopting a wait-and-see approach for retail investors.