Singapore is a hub for global and local asset managers in the Asia-Pacific region, making it a preferred and trusted domicile for funds.
Our previous article, published in December 2020, discussed the Variable Capital Companies (VCCs), a flexible corporate structure introduced fairly recently in Singapore, designed for investment funds.
With this article, we aim to cover the key legal and compliance requirements as well as general guidelines applicable to the setting up of fund management companies. In this article, we will:
- Consider the various types of fund management companies available in Singapore
- Compare the licensing and registration requirements for the different types of fund management companies
- Set out the admission criteria and requirements when applying to set up a fund management company
“Fund Management”, as referred to in the Securities and Futures Act (SFA), means:
- Managing the property of, or operating, a collective investment scheme; or
- Undertaking on behalf of a customer (whether on a discretionary authority granted by the customer or otherwise), not including real estate trust management, the:
- Management of a portfolio of capital markets products; or
- Entry into spot foreign exchange contracts for the purpose of managing the customer’s funds.
To conduct regulated fund management activities under the SFA, a company must be registered with the Monetary Authority of Singapore (MAS) or hold a Capital Markets Services (CMS) licence to operate either as a Registered Fund Management Company (RFMC), a Licensed Fund Management Company (LFMC) (whether as an accredited investor (A/I) LFMC, or retail LFMC), or a Venture Capital Fund Manager (VCFM).
The relevant requirements for the setting up of each type of fund management company are elucidated in the table below.
Further, note that individuals performing key functions in a fund management company, such as portfolio construction and allocation, research and advisory, business development and marketing or client servicing are required to be “representatives”.
So as to meet the requirements of being a “representative”, such individual needs to:
- Be at least 21 years old;
- Satisfy the minimum academic qualifications and examination requirements; and
- Satisfy the fit and proper criteria.
Fund Management Licensing (Registration or Exemption) Regime
We set out in the table below the general guidelines, eligibility criteria and application procedures for Venture Capital Fund Managers (VCFMs), Registered Fund Management Companies (RFMCs) and A/I and Retail Licensed Fund Management Companies (LFMCs).
|VCFM||RFMC||A/I LFMC||Retail LFMC|
|Licence or Registration Status||CMS (Venture Capital Fund Management) Licence||Exempt (but must be registered as an RFMC)||CMS (A/I LFMC) Licence||CMS (Retail LFMC) Licence|
|Investor restrictions||Accredited and institutional investors only;
No new subscription after close of fund-raising
|Not more than 30 accredited and institutional investors, of whom not more than 15 can be funds||Accredited and institutional investors only, no restriction on number of qualified investors||No restrictions|
|Assets under management (AUM) limit||None||S$250 million||None||None|
|Base capital||None||S$250,000||S$250,000||At least S$500,000 (for non-CIS) or S$1 million (CIS)|
|Risk-based capital requirement||None||None||120% of operational risk requirement||120% of operational risk requirement|
|Director Requirements||Fund managers do not need > 5 years’ fund management experience||At least 2 directors with more than 5 years of relevant experience, with at least 1 being executive and full-time resident in Singapore||At least 2 directors with more than 5 of relevant experience, with at least 1 being executive and full-time resident in Singapore||At least 2 directors with more than 5 years of relevant experience, of which at least 1 director has more than 10 years of relevant experience, is an executive and is a full-time resident in Singapore.|
Fund management companies (namely LFMCs, VCFMs and RFMCs) should also meet ongoing business conduct requirements, such as requirements relating to custody, valuation and reporting, conflicts of interest mitigation, disclosure and submission of periodic returns. These are set out in the MAS Guidelines on Licensing, Registration and Conduct of Business for Fund Management Companies.
What are the Admission Criteria and Applicable Requirements?
When assessing an application to be an RFMC, LFMC or VCFM, the MAS takes into account factors such as:
- Fitness and propriety of the applicant, its shareholders, directors, employees as well as the company itself in accordance with Guidelines on Fit and Proper Criteria.
- Track record and fund management expertise of the applicant and its parent company or major shareholders.
- Competency of key individuals such as the CEO, directors, and relevant professionals in the company, taking into consideration whether such persons have adequate experience relevant to fund management. Directors of the company should collectively have experience in portfolio management (including experience in asset classes or markets the company intends to invest in) and other support functions such as risk management, operations and compliance.
- Ability to meet the minimum financial requirements prescribed under the SFA.
- Strength of internal risk management and compliance systems.
- Business models, plans, projections and the associated risks.
This update is provided to you for general information and should not be relied upon as legal advice.