When an SPV sponsor needs a MAS licence, explained

Key figures

• s 82(1) Section of the Securities and Futures Act that requires the licence

• S$150,000 · 3 years Maximum fine and prison term for carrying on business without a licence

• 80% Share of committed capital a venture capital fund manager places in young unlisted companies

• 50 persons · 12 months Private placement limit on offers to investors who are not accredited

• 6 months Resale restriction on shares acquired under the accredited investor exemption

• Up to 2 years Time an application for a new licence can take

Contents

1. The section 82 licence test

2. One-off deal or business

3. Dealing in capital markets products

4. Fund management

5. Financial advisory

6. Offer rules and the accredited investor exemption

7. Licensing routes for an SPV sponsor

A sponsor finds a deal, gathers prospective investors, puts them into an SPV. Two questions decide the licence requirement: (1) What specifically the sponsor does and (2) whether it does it as a business.

1. The section 82 licence test

Section 82(1) of the Securities and Futures Act requires a capital markets services licence for carrying on business in a regulated activity. Dealing in capital markets products and fund management are regulated activities. A licence must in principle be in place before the business starts.

2. One-off deal or business

The Act applies to carrying on business. Business is a systematic, regular and continuous pursuit of commercial activities. Arranging a one-off deal alone is therefore not enough. In The Enterprise Fund II Ltd v Jong Hee Sen [2019] SGHC 87, the High Court looked for system and continuity. The transaction was incidental to the plaintiff’s lending business. No licence was needed.

A first deal is not the same as a one-off deal. Some regulators treat a single transaction as a business activity where the sponsor intends to repeat it. The High Court declined to apply that test because counsel had not argued it, and said nothing on the merits. This is an open point. MAS frames the trigger as system, regularity and continuity. Holding out is a separate limb: a website counts and so does a standing investor list.

Note

Intent counts

A sponsor who plans a second SPV may not be able to rely on the first one being treated as a one-off.

3. Dealing in capital markets products

Dealing in capital markets products is regulated under the Securities and Futures Act and generally requires a Capital Markets Services (CMS) licence. Dealing includes inducing or attempting to induce a person to subscribe for capital markets products. Shares in a Singapore SPV are securities and hence capital markets products. Inviting investors in, collecting commitments and arranging subscriptions is inducing. What the SPV buys is irrelevant.

MAS publishes the example. Company A surfaces start-up deals to syndicate members in a Telegram group and collects their interest against a deadline. It pools their money, answers their questions on the offer and charges fees for putting the deals together. MAS says Company A would likely need a licence for dealing. A networking club, on the other hand, that runs events and encourages introductions, and solicits no specific investment, likely needs none. The decisive test is whether solicitation was pursued.

Note: In a bare trust nominee structure investors pay the target directly. Nothing is pooled. Solicitation for a fee, however, still induces subscriptions. Corporate SPV or bare trust nominee, explained compares the two vehicles on control and cash.

Case in point

The second deal

A sponsor closes one SPV into a fintech startup in March. Its website lists the deal and invites investors to register for the next one. In September it opens a second SPV for the same group and charges each investor 2% of the amount subscribed. The website would likely be considered as “holding out”. The second SPV is repetition. The 2% fee, calculated on subscriptions, points to dealing and threatens the offer exemption.

4. Fund management

Fund management requires a CMS licence if one of two conditions is met: (1) managing the property of, or operating, a collective investment scheme, or (2) managing a customer’s portfolio of capital markets products, whether on a discretionary basis or otherwise. Voting shares in the sponsor’s hands point to the sponsor as operator.

A collective investment scheme requires three things: (a) no day-to-day investor control, (b) property managed as a whole, or pooled, and (c) expected returns. A standard SPV hits all three. Investors holding non-voting shares have no control to point to.

The statute provides an exclusion: a closed-end fund falls outside the collective investment scheme definition, unless it invests under a stated investment policy. An SPV holding one specific asset, agreed before subscription, has a reasonable case for that exclusion. MAS has issued no guidance on single-asset vehicles. The point remains untested. The documents, and lived reality, are likely to decide the outcome. They must name the single investment. They must grant the sponsor no power to reinvest, fund follow-ons, or invest idle cash.

Escaping the collective investment scheme definition does not end the test. The second limb remains. The portfolio limb catches a sponsor who decides for investors on buying, holding or selling. Investor approval of each step does not take it outside.

Case in point

The follow-on

An SPV holds one SAFE in a UK company. Eighteen months later the company raises a Series A. The SPV documents let the sponsor draw on a reserve to buy into the round. That power is an investment decision made for investors. It weakens the closed-end case and engages the portfolio limb. One clause. Two problems. An SPV that can only hold the converted shares has neither.

5. Financial advisory

Recommending a deal, or sending investors analysis of it, may be advising on investment products under the Financial Advisers Act. This requires an additional licence, separate from a CMS licence.

The statute provides a carve-out: a CMS licence holder is exempt from needing this licence for advice rendered outside its main business. Some obligations under that Act, however, survive the exemption.

An offshore base is no defence. Section 339 of the Securities and Futures Act reaches conduct abroad with a substantial and reasonably foreseeable effect in Singapore. A foreign sponsor targeting prospective investors in Singapore faces the exact same regulatory perimeter.

6. Offer rules and the accredited investor exemption

The prospectus requirement hinges on the nature of the prospective investors. Offering shares exclusively to accredited investors removes the prospectus requirement under section 275, or section 305 of the Securities and Futures Act where the SPV is a collective investment scheme. This question is independent of any sponsor’s licence requirement. A sponsor can make a fully exempt offer and still commit a licensing offence.

An individual qualifies as an accredited investor having net personal assets above S$2 million, financial assets above S$1 million net of related liabilities, or income of at least S$300,000 in the preceding 12 months. The primary residence counts for no more than S$1 million of net personal assets. A company qualifies with net assets above S$10 million, or where accredited investors own all its shares.

The prospect must formally opt in to be treated as an accredited investor before the sponsor accepts the subscription. The sponsor must collect the written opt-in the MAS regulations require, given after written notice of the protections the investor gives up, alongside documentary proof such as bank or brokerage statements or a notice of assessment.

Note

Paper, not word of mouth

No signed opt-in and no evidence on file imperils the accredited investor exemption.

The exemption carries conditions.

• No public advertisement for the offer is permissible.

• No selling or promotional expenses, other than for administrative or professional services or a fee to a licensed or exempt dealer.

• A six-month restriction on resale of shares acquired under section 275.

• Where the SPV is a collective investment scheme, notice to MAS and entry on its list of restricted schemes before the offer, and a manager licensed or regulated to manage it.

Note

The sponsor’s fee

A fee calculated on amounts subscribed, or shared with introducers, can be a selling expense. A fee paid out of profits for sourcing and structuring the investment carries less risk. MAS has not defined the term.

Investors who are not accredited fall back on two exemptions. The small offers exemption covers personal offers raising up to S$5 million in 12 months. The private placement exemption covers offers to no more than 50 persons in 12 months. Same ban on advertising and selling expenses. No effect on the licence.

7. Licensing routes for an SPV sponsor

A licence cannot be lent. A sponsor without its own MAS licence must rely on structure or partner with a firm that holds one.

Note: A venture capital fund manager regime is an available licensing route with lighter requirements. It requires investment of at least 80% of committed capital in securities issued directly by unlisted companies incorporated for no more than 10 years at first investment. Whether a SAFE is a qualifying security is unsettled. The other 20% may go elsewhere.

Auberique executes all four routes. It establishes bare trust nominees through its special purpose vehicles service. Sponsors needing immediate cover operate under an associated MAS-licensed firm. Repeat sponsors run deals as segregated sub-funds of a VCC managed by Auberique’s licensed partner. For those building a permanent institution, Auberique manages the venture capital fund manager licence application.

Common questions

Does an SPV sponsor need a MAS licence for one deal?

Only if it carries on business in a regulated activity. A single, isolated SPV supports the argument that it does not. A sponsor who intends to repeat the model cannot rely on its first SPV being treated as a one-off.

When does a syndicate lead need a capital markets services licence?

MAS says a company that presents start-up deals to syndicate members, pools their money, answers their queries and charges fees for putting deals together would likely need a licence for dealing. A club that only admits members, filters deals and runs introductions typically needs none.

Is an SPV a collective investment scheme?

A standard SPV meets the general criteria. An SPV with non-redeemable shares that holds one investment, agreed before investors subscribe, has a reasonable case for the closed-end fund exclusion. MAS has issued no guidance on single-asset vehicles.

Does offering only to accredited investors avoid the licence?

No. Sections 275 and 305 of the Securities and Futures Act exempt the offer from the prospectus requirement. They do not exempt the sponsor from licensing for dealing or fund management.

What must a sponsor collect from an accredited investor?

The written opt-in the MAS regulations require, given after written notice of the protections the investor gives up, and documentary proof of status such as bank or brokerage statements or a notice of assessment. Both before the subscription is accepted. A verbal claim is not enough.

Can an SPV sponsor charge investors a fee?

The offer exemptions bar selling or promotional expenses other than permitted fees. A fee calculated on amounts subscribed carries more risk than a fee paid out of profits for sourcing and structuring the investment.

What options does a repeat SPV sponsor have?

A bare trust nominee structure, umbrella cover under an MAS-licensed firm, a sub-fund of a variable capital company managed by a licensed fund manager, or its own licence. An application for a licence can take up to two years.

Auberique sets up corporate SPVs and bare trust nominee structures through its special purpose vehicles service. Repeat sponsors can work under umbrella cover, run deals as VCC sub-funds under Auberique’s licensed partner, or apply for their own licence. Sponsors track each closing in the Auberique client portal.

About the author

Gavin McDaid is a practising solicitor (England and Wales) and former venture capitalist, with an LLM in Law and Technology from Queen’s University Belfast. He writes on company law, fundraising and governance in Singapore.