Fund management companies (“FMCs”) which carry on business of fund management in Singapore must, unless they fall within an exemption, obtain a capital markets services (“CMS”) licence from the Monetary Authority of Singapore (“MAS”).
In the wake of increased oversight of the investment funds industry by regulators globally, the MAS announced proposals in April 2010 to restructure the regulatory regime for FMCs operating in Singapore. Consultation conclusions and draft regulations were released in September 2010 and September 2011 respectively.
The implementation of the enhanced regulatory regime took effect from 7 August 2012.
Key features of the new regime (which has substantially followed the consultation proposals) are as follows:
There will be three categories of FMCs:
- Registered FMCs – FMCs with assets under management not exceeding S$250 million and with no more than 30 qualified investors (of which no more than 15 may be funds or limited partnership fund structures).
- Licensed A/I FMCs – FMCs which serve only qualified investors, without restriction on the number.
- Licensed Retail FMCs – FMCs which serve all types of investors including retail investors.
- All FMCs will have to meet enhanced business conduct, base capital and risk-based capital requirements. These include rules requiring independent custody and valuation of investor assets, as well as requirements for FMCs to undergo independent annual audits by external auditors and having an adequate risk management framework commensurate with the type and size of investments managed by the FMCs.
- Competency requirements will be imposed on key individuals. All FMCs are required to have at least two directors, each with at least five years relevant experience. At least one director must be an executive director who is resident in Singapore and employed on a full time basis and responsible for the day-to-day operations of the FMC. The CEO of a Licensed Retail FMC must have at least ten years relevant experience.
- Registered FMCs and Licensed A/I FMCs must employ at least two professionals resident in Singapore. Licensed Retail FMCs must employ at least three professionals resident in Singapore. Professionals can include the directors and CEO of the FMC.
- Representatives of Licensed Retail FMCs have to sit for various modules of the Capital Markets and Financial Advisory Services Examination.
Key factors for the grant of a CMS licence, which has remain largely unchanged, include:
- track record, management expertise and financial soundness of the applicant and its parent company or major shareholders;
- ability to meet the minimum financial requirements;
- strength of internal compliance systems;
- business plans and projections; and
- fitness and propriety of applicant, directors, CEO, shareholders and professionals.
Registered FMCs must notify MAS that it is commencing business.
Licensed A/I FMCs and Licensed Retail FMCs must apply for a licence. Key documents required for a licence application include:
- Form 1A (Application for a Capital Markets Services Licence for Fund Management Company)
- Form 3A (Notification for the Appointment of an Appointed Representative)
- Form 11 (Appointment of CEO or Director)
- Shareholding chart of the applicant
- Organisational chart of the applicant including job functions and designations and reporting lines of all employees
- Financial statements
Information gathering will be a substantial part of the application process as evidence will have to be provided to the MAS to verify the criteria for the grant of a CMS licence. Depending on the quality and completeness of the information supplied, a licence application may be processed within 12 weeks.
FMC registrations, applications and notifications including new licence applications, appointment of directors and annual declarations will have to be made via the MAS Corporate e-Lodgment online submission system.