Fund Management Company FAQs
A Singapore Fund Managment Company is regulated under the Securities and Futures Act (Cap. 289) and to conduct the regulated activity of fund management, the FMC must obtain either a registration or a license from MAS as a Registered Fund Management Company (RFMC), Capital Markets Services License (CMSL) as a Licensed Fund Management Company or a Venture Capital Fund Manager (VCFM) or be expressly exempted from holding a licence.
Fund Management is a regulated activity governed by the Monetary Authority of Singapore (“MAS”). Please see the link to our article and infographic which gives the detailed requirements and differentiation between the various types of fund management regime in Singapore. For more on fund management company, see our FAQs:
Management of investments for clients is very popular in Singapore and is popularly referred to as the External Asset Management (“EAM”) model. This required the entity performing this activity to be regulated as a fund manager by the MAS. Please see the link to our article which details out this model below
Offers of any fund can be made to retail investors or be made on a private basis. Offers in general, can only be made if:
- a full prospectus has been registered with MAS and in the case of collective investment schemes, the scheme is authorised or recognised by the MAS; or
- the offer falls within one or more of the safe harbours prescribed in the Securities Futures Act.
Some of the safe harbour rules are:
- private placement – offer fund to maximum of 50 persons in any 12-month period
- institutional investor – offer fund to institutional investors such as licensed banks, licensed companies or pension funds
- relevant persons – offer fund to accredited investors or to any persons making a minimum subscription of S$200,000.
Regulated fund managers in Singapore who engage in marketing of funds are considered to be dealing in capital markets products that are units in a collective investment scheme (“CIS”). However, fund managers are typically exempted from the need to add dealing in capital market products if they market the funds that they manage or funds managed by their related corporations.
To qualify for licensing or regulation in Singapore as a fund manager, a company must perform substantive fund management activities such as portfolio management, investment research or trade execution. Marketing of funds activities would typically require the company to apply for capital markets services licence dealing in capital market products.
MAS does not consider investing in one’s own money as relevant experience in the context of the fund manager that is seeking to manage monies for third parties.
The requirement to have independent custodian would not apply to private equity or venture capital (“PE/VC”) funds which are closed–ended funds offered to accredited and/or institutional investors. However, fund managers are required to disclose this fact to the investors, obtain their acknowledgement and provide investors with an audit report of the assets in each year. Fund managers must ensure customer funds are subjected to proper segregation.
PE/VC fund managers must ensure fund assets are subject to independent valuation and customer reporting by appointing independent fund administrators. Given the difficulty in arranging for PE/VC assets to be independently valued, valuation function can be performed in-house provided conflicts of interest are adequately dealt with.
Sub-advisors who are conducting research and advisory activities will be classified as a fund manager if:
- the sub-advisor has discretion over the construction of its clients’ portfolio
- the sub-advisor or its key officers are able to exercise control over the client
- the sub-advisor is named in the fund prospectus, offering documents or marketing materials
- the sub-advisor has full–knowledge of, or access to the holdings of the client’s fund or portfolio
If the sub-advisor does not fulfil the above, the entity would be required to be either licensed or exempted under the Financial Advisers Act.
Companies must ensure they are able to meet the minimum application requirements prior to submission of application to MAS. However, in cases where individuals such as representatives and relevant professionals are still employed elsewhere at time of application, Company is able to provide a tentative start date for these individuals and provide their employment history to MAS.
Companies must ensure they are able to meet the minimum application requirements prior to submission of application to MAS. However, in cases where individuals such as representatives and relevant professionals are still employed elsewhere at time of application, the company is able to provide a tentative start date for these individuals and provide their employment history to MAS.
The Singapore NRA in intended to give the private sector a better understanding of the ML/TF risks in their own section, as well as other sectors that they have dealing with. Relevant high risk financial and non-financial sectors identified in the NRA report should be factored into their EWRA.
Reasonable grounds can include the following:
- refusal by customer to provide, or inability to provide, complete CDD documents
- no match between source of funds and wealth with the investment amount
- customer requests to make fund transfers that do not make economic sense
- FI identifies new information on customer which was previously not disclosed to FI.
FIs are not required to establish beneficial owners of a customer that is a government-owned entity, whether local or foreign, unless the FI has doubts about the veracity of the CDD information, or suspects that the customer, business relations with, or transaction for the customer may be connected to money laundering / terrorist financing (“ML/TF”) activities.
Ongoing monitoring is a fundamental feature of an effective Anti-Money Laundering/Countering Financing of Terrorism (“AML/CFT”) risk management system. All FIs may conduct ongoing monitoring according to customer’s money laundering/terrorist financing (“ML/TF”) risk profile. Higher risk customers should be subject to more frequent periodic review (at least annually) to ensure CDD information previously obtained remains relevant and risk profile remains relevant.
FIs may use commercial ML/TF databases to verify adverse information on individuals and entities. FIs should also refer to list of individuals and entities covered under the MAS Regulations in relation to United Nations Security Council sanctions or freezing of assets of persons and names provided in the Terrorism (Suppression of Financing) Act.
FIs may conduct simplified due diligence if they are satisfied money laundering/terrorist financing (“ML/TF”) risks posed by the customer are low. FIs must still be able to effectively identify and verify identify of the customer, any natural persons appointed to act on behalf of the customer and any beneficial owners where relevant. Screening should be conducted on all beneficial owners identified.
Family member refers to a parent, step-parent, child, step-child, adopted child, spouse, sibling, step-sibling and adopted sibling of the politically-exposed person.
In determining who close associates are, Financial Institution (“FI”) may consider factors such as level of influence the PEP has on such person or the extent of his exposure to the PEP. FI may rely on information obtained from public sources and information obtained through customer interaction.