MAS issues Consultation Paper on repeal of regulatory regime for Registered Fund Management Companies

      Overview of the RFMC regime

      The RFMC regime was introduced in 2012 after the Exempt Fund Manager (EFM) regime was repealed. This change allowed EFMs to choose between becoming a Licensed Fund Management Company (LFMC) or a Registered Fund Management Company (RFMC). The main objective was to enhance regulatory oversight and raise industry standards. The RFMC regime was designed to facilitate the transition of EFMs into a fully regulated framework. Both RFMCs and LFMCs serving accredited or institutional investors have similar admission criteria and business conduct requirements, with the main difference being in reporting frequency and granularity.

      Under the RFMC regime, these companies are limited to managing assets of up to S$250 million and serving a maximum of 30 qualified investors, including accredited or institutional investors. RFMCs seeking to exceed these limits may apply to become A/I LFMCs.

      Repeal of RFMC regime

      The fund management industry has evolved and expanded significantly since the introduction of the RFMC regime. Many former EFMs that operated as RFMCs have adapted to the regulatory framework and have transitioned to A/I LFMCs as their businesses grew. New entrants to the industry tend to apply for A/I LFMC status rather than RFMC according to MAS. Given these developments, MAS believes the RFMC regime has fulfilled its purpose in transitioning EFMs, and it is now time to streamline and harmonise regulatory requirements for all fund managers. This simplification will support the long-term growth of the industry.

      MAS has issued a Consultation Paper on the proposed changes and asks that any written comments be given by 31 December 2023. You can read the full Consultation Paper here.

      Transitional arrangements

      For existing RFMCs to continue fund management activities post-repeal, they must apply for a Capital Markets Services (CMS) license for fund management and be granted the licence before the RFMC regime is repealed. Successful applicants will be granted a CMS licence upon repeal, and their exempt representatives will transition to appointed representatives. Licensing fees will apply on a pro-rated basis. RFMCs that do not apply within the specified timeline will be considered as choosing to cease fund management activities.

      MAS will only grant the CMS licence if the companies fulfil the following conditions:

      • have carried on business in fund management activities in the last six months immediately preceding the submission of the application form
      • have submitted an application via the application form within the stipulated timeline.

      MAS has indicated it will commit to responding to all applications from RFMC within a month of submission.

      Specific restrictions and requirements on A/I LFMCs transitioned from RFMCs

      RFMCs transitioning to A/I LFMCs will be subject to certain restrictions, including a cap on managed assets (up to S$250 million). However, there is no limit on the number of investors or funds managed. They must comply with reporting requirements applicable to typical A/I LFMCs. MAS recommends they become familiar with regulatory requirements and consider engaging professional compliance service providers if they require in-house compliance support.

      Legislative amendments and implementation plan

      MAS will implement the repeal of the RFMC regime after considering industry feedback and finalising legislative amendments. From 1 January 2024, MAS will cease accepting new RFMC applications, and applicants seeking to conduct fund management should apply for a CMS license, ensuring they meet all admission and ongoing requirements. Outstanding RFMC applications will be reviewed and registered before the repeal date.

      Key points to note

      Existing RFMCs should apply for a CMS license for fund management to continue their business once the new regulation comes into effect. The current AUM limit of S$250 million will be retained via a licence condition to be imposed on such transitioned RFMCs, which may subsequently engage with MAS to review and lift this restriction.

      A/I LFMCs in transition should prioritise adherence to reporting obligations and evaluate the potential necessity of engaging professional compliance service providers. It is crucial to gain a comprehensive understanding of the A/I LFMC requirements and conduct a comprehensive review of the business to identify necessary adjustments. These adaptations may encompass revising existing compliance policies and procedures, updating the compliance monitoring plan, and acquainting oneself with financial reporting and requisite forms.

      How can Waystone assist?

      Waystone has been assisting many A/I LFMCs with their compliance requirements and assisting new entrants to obtain their licence with MAS. Waystone can assist firms with the following:

      • transition from RFMC to A/I LFMC and discussions with MAS
      • upgrade of RFMC compliance policies to A/I LFMC requirements
      • development and implementation of a compliance monitoring plan for A/I LFMC
      • quarterly and annual financial form computation which is specific for A/I LFMC
      • conducting an internal audit to review the compliance health and readiness to meet A/I LFMC compliance requirements.

      If you would like to discuss this topic further, please reach out to your usual Waystone representative, or contact us below.

      Contact us

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