Singapore-based crowdfunding platform for small businesses Funding Societies announced on Monday night that they are temporarily halting crowdfunding loan terms following regulatory update from Monetary Authority of Singapore (MAS).
Announced in early June, the regulatory update requires crowdfunding platform to apply for Capital Markets Services (CMS) licence to operate.
According to a statement by Funding Societies, “We and the industry expected minimal operational change, as ‘MAS anticipates that the relevant amendments will be tabled in Parliament in the second half of 20162,’ impacting us only in late 2016.”
However, when the startup initiated clarification meeting with senior authorities and sought for legal advice from law firms, the company found out that it begins with immediate effect though regulatory amendments only apply after the Parliamentary approval.
While it remains unclear whether MAS will take disciplinary actions against P2P lending platforms in the country, Funding Societies decided to temporarily halt crowdfunding loan terms and take several mitigation steps that begin with submission of licence application.
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“‘Typically’, it takes three to four months [for the applicant to be approved], but we could be faster or slower. We’d resume crowdfunding term loan ASAP, once we get licensed!” it stated.
Apart from application submission, Funding Societies will also “restructure to avoid regulatory grey area” and enable lending via private placement.
The company also stated that it is currently exploring the development of an alternative product which is potentially permissible for crowdfunding.
It will also continue on servicing current loans and ensure repayment collections.
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Funding Societies Co-Founder Kelvin Teo updated e27 about their licence application process.
“We’re exploring options now. However as usual, being fully compliant is our top priority, especially given now that there is no regulatory ambiguity. We hope that by being the first to comply with regulations, we’d be able to secure the CMS license faster and continue serving SMEs and the community,” he wrote in an e-mail.
“We’ve already completed legal advice and restructured our business model, so that we can continue to help businesses to raise funds, while being fully compliant with the current regulations and clarifications,” he added, also mentioning that investors at Funding Societies have been supportive of the process.
Teo also founded a similar platform in Indonesia called Modalku, and he stressed the commitment to remain compliant with regulations.
“In fact, [we] have been selected as the Co-Chair of the P2P Lending Task Force of the FinTech Association, supported by OJK,” he wrote.