Singapore: MAS Announces Policy Posture On Securities-Based Crowdfunding

Last Updated: 17 June 2016
Article by Eric Chan

 On 8 June 2016, the Monetary Authority of Singapore ("MAS") finally announced its long awaited policy posture on crowdfunding. This was done by publication of formal responses to feedback received after the release of its consultation paper in February 2015 (the "February 2015 consultation paper").

To recap, the term "crowdfunding" describes an approach to capital fund raising that involves participation by a large number of investors (the so-called crowd). Crowdfunding can be deployed to raise funds for a variety of purposes, for instance, to raise funds for charitable purposes, or to help finance the production of a novel consumer product that could then be given out to the investors who helped by participating in the crowdfunding effort.

The MAS consultation and the policy posture announced on 8 June 2016 relate only to securities-based crowdfunding, which refers to the offer of securities (whether in the form of debt or equity instruments) via a crowdfunding platform.

This note summarises the key policy postures announced by MAS.

The Target Audience for Securities-based Crowdfunding

In the February 2015 consultation paper, MAS had sought views as to whether participation in securities-based crowdfunding should be limited mainly to accredited investors and institutional investors, or whether participation should also be open to retail investors (i.e. those who are not accredited investors nor institutional investors). MAS has now decided that the existing legal rules concerning offering of investments to retail investors should remain largely intact for securities-based crowdfunding. It was felt that securities-based crowdfunding remains very much a nascent industry globally, and that retail investors might not have the experience or expertise to fully appreciate the risks involved when participating in and investing through crowdfunding platforms.

Prospectus Requirements under Part XIII of the SFA

Currently, the offering within Singapore of certain types of investment products (such as equity and debt instruments, and units in collective investment schemes) is subject to the requirements of Part XIII of the Securities and Futures Act ("SFA"). Broadly speaking, Part XIII of the SFA provides, amongst other things, that such offerings must be accompanied by a prospectus which meets specified requirements and which must be registered with MAS. Various exemptions from the prospectus requirements are provided for, and these exemptions would typically be based on various factors, such as the circumstances of the particular offering, the amount sought to be raised from the offering, the type of investors targeted by the offering, etc. These rules would largely be retained and apply to securities-based crowdfunding.

New Guidelines on Advertising Restrictions for certain Exempt Offerings under Part XIII of the SFA

Although the existing rules on prospectus requirements will remain in place, MAS has pointed out that some of the prospectus exemptions currently do enable an issuer to make investment offerings to retail investors. However, such exempt offerings are subject to conditions.

For instance, the Small Offers Exemption allows an offering to be made without a prospectus if the amount raised within any period of 12 months does not exceed S$5 million, whilst the Private Placement Exemption allows an offering to be made without a prospectus if the offer is made to no more than 50 persons within a period of 12 months. There is also a prospectus exemption for offerings that are aimed at persons who are accredited investors or in a comparable position. These exemptions are further subject to other conditions, including a requirement that there must not be any advertisement of the offer or advertisement calling attention to the offer or intended offer. The purpose of this restriction against advertisements is to help ensure that the offering remains limited in reach.

Recognising that the current regulatory regime in Part XIII of the SFA does not fully take into account the role played by a securities-based crowdfunding platform, MAS has issued a new set of guidelines on what would be considered to be sufficient compliance with the advertising restrictions whenever reliance is placed on the prospectus exemptions provided in either section 272A (Small Offers), section 272B (Private Placement) or section 275 (Accredited Investors and other relevant persons) of the SFA. In general, the platform cannot be one that permits unrestricted access. Communications may only be made to persons who are qualified to be offered under the relevant prospectus exemption, and the content of such communications must be confined to factual information. Offers made through a securities-based crowdfunding platform that provides unrestricted access would not be considered to be compliant with the advertising restrictions applicable to the relevant prospectus exemption.

Easing of Pre-Qualification Requirements under the Small Offers Prospectus Exemption

Recognising that the Small Offers Exemption in section 272A of the SFA will be of relevance in a crowdfunding scenario, but that the exemption (originally provided in 2005) might not cater specifically to a crowdfunding model, MAS has agreed to ease certain requirements in the existing Guidelines on Personal Offers made pursuant to the Exemption for Small Offers (the "Guidelines on Small Offers").

Currently, the Guidelines on Small Offers require that both of the following pre-qualification requirements are observed:

(a) That potential investors have sufficient knowledge or experience to invest ("Knowledge/Experience Test"); and

(b) That the investment is suitable for them in the light of their investment objectives and risk tolerance ("Suitability Assessment Test").

Moving forward, where an offering is made through a securities-based crowdfunding platform in reliance on the Small Offers Exemption, the Guidelines on Small Offers will be amended such that the operator of the securities-based crowdfunding platform as well as the offeror must make sure that either the Knowledge/Experience Test or the Suitability Assessment Test is administered to pre-qualify the investor to whom the offer will be made. As part of the pre-qualification procedure, the crowdfunding platform operator will also be required to provide the investor with a risk disclosure statement in a prescribed format and to obtain the investor's acknowledgment (in electronic or written form) that he has read and understood the risk disclosure statement.

Abolition of Provision excluding certain Promissory Notes from the scope of Part XIII of the SFA

Currently, the investment offering rules in Part XIII of the SFA do not apply to a promissory note that has a face value of at least S$100,000 and a maturity period of 12 months or less, and as such the prospectus rules do not apply to an offering of such a note. This exclusion will be removed so that promissory notes of all value and maturity periods will, moving forward, be subject to the same investment offering rules.

Regulation of Securities-based Crowdfunding Platform Operators under Part IV of the SFA

In the February 2015 consultation paper, MAS had already highlighted that given the definition in the SFA of the expression "dealing in securities", the operator of a securities-based crowdfunding platform would be required to hold a Capital Markets Services Licence ("CMSL") for dealing in securities under Part IV of the SFA.

However, promissory notes are currently not considered to be "securities" for the purposes of Part IV of the SFA. As a result, a crowdfunding platform that deals only in debt instruments (as opposed to equity) will be able to operate without having to hold a CMSL for dealing in securities, since it would not be dealing in securities as such. Noting that a promissory note has features no different from other types of debt instruments which would be considered to be "securities", MAS has decided in line with the policy posture taken in relation to Part XIII of the SFA, that the exclusion of promissory notes from being considered as "securities" should also be removed.

The effective result is that operators of all securities-based crowdfunding platforms (whether for debt or equity instruments) will at the very least need to hold a CMSL for dealing in securities. Additional authorisations from the MAS, either under Part IV of the SFA or under the Financial Advisers Act might well be required as well, depending on the specific operating model of, or services offered on, the platform.

As a concession to licensed dealers that (i) do not carry any customer's positions in securities, margins or accounts in their own books; (ii) serve only accredited and/or institutional investors; and (iii) do not act as principal counterparty vis-à-vis the customers, MAS will, in recognition of their reduced level of operational risks, make the following changes to the criteria for grant of a CMSL:

(a) The base capital requirement will be lowered from the current S$250,000 to S$50,000; and

(b) It would no longer be necessary for the dealer, upon being granted a CMSL, to place with MAS a deposit of S$100,000 as security to cover losses suffered by customers.

Closure of Loopholes relating to Promissory Notes

As already mentioned above, the two existing exclusions relating to promissory notes, which in fairness can only be described as loopholes, will be closed.

Pending the formal removal of these loopholes by legislative amendment, MAS has, in a newly issued set of Frequently Asked Questions on Lending-Based Crowdfunding, specifically warned that the attempt by some crowdfunding platforms to keep within the Part XIII promissory notes exclusion – by having the borrower issue a single promissory note with a face value of S$100,000 or more, to a group of lenders who each lend less than S$100,000 – will not be considered to be compliant with the requirements of the SFA.


The adoption by MAS of a formalised policy posture on crowdfunding has been long anticipated and the specific positions articulated seem eminently practical. Some industry participants might perhaps be disappointed that MAS has decided against further liberalisation of the regulatory rules, but it seems that the revised MAS approach does strikes a sensible balance between supporting innovation and taking excessive risks.

In recent times, there has indeed been a lot of enthusiasm over crowdfunding. It might well be trendy to invest through a crowdfunding platform and business enterprises might find crowdfunding platforms attractive as an alternative source of funding. But ultimately one must not lose sight of the fact that investing through crowdfunding platforms involves a very substantial degree of risk, which can be easily underappreciated or entirely overlooked. All it takes to burst the bubble is one case of a default. Naturally, no one wishes for this to occur, and as such it would be hard to fault the regulator for loosening current rules only ever so slightly but otherwise continuing to limit participation in securities-based crowdfunding to investors who have the requisite sophistication and experience.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions