Overview of Fund Management Licences in Singapore

Singapore is constantly an attractive option among fund managers around the world as a base of operations. Being Asia’s asset management centre, there are a well-diversified portfolio of assets worth $3.4 trillion under the country’s administration. These trillions of assets are under management of more than 900 licensed and registered fund managers within Singapore. Find out more on the considerations for setting up a hedge fund in Singapore.

In accordance with the Securities and Futures Act (SFA), fund management companies in Singapore need to register themselves with MAS. Otherwise, the company should at least hold a Capital Markets Service Licence to continue operations.

Types of Fund Management Licences in Singapore

3 types of fund management licences include:

1. Licensed Fund Management Company (LFMC)
2. Registered Fund Management Company (RFMC)
3. Venture Capital Fund Manager (VCFM)

In 2012, the MAS has replaced the Exempt Fund Manager (EFM) regime with a new category of RFMC. RFMCs can serve up to 30 qualified investors, with the asset under management not more than S$250 million. All the other FMCs fall outside of this scope need to apply for a licence.

Within the category of LFMCs, it is further divided into Retail LFMCs, A/I LFMCs and VCFMs. There are certain requirements that need to be fulfilled under LFMCs although there is no restriction on the number of investors.

Licensing Requirements

1. Capital Requirement

FMCs shall at all times meet the requisite base capital thresholds. The base capital requirement is within the range of S$250,000 to S$1,000,000 before taking into account the additional capital buffer.

a) Base capital requirement for fund managers that offer Collective Investment Scheme (CIS) to non-accredited/ non-institutional investors is S$1,000,000.

b) Base capital requirement for fund managers that offer non-CIS to non-accredited/ non-institutional investors is S$500,000.

c) Base capital requirement for all the other fund managers is S$250,000.

A licensed fund management company needs to meet the above-mentioned capital requirements as well as other risk management obligations. Both Retail LFMCs and A/I LFMCs should maintain at least 120% above its total risk requirement.

2. Competency Requirement

An FMC has to ensure the competencies of key stakeholders including shareholders, directors and employees, to name a few. Stakeholders need to demonstrate their fitness and propriety taking into account criteria of integrity and financial soundness. Other than VCFMs, all FMCs must appoint at least 2 directors with no less than 5 years of relevant experience. Meanwhile, to operate as a Retail LFMCs, the CEO should have at least 10 years of relevant experience together with a minimum of 3 representatives residing in Singapore.

3. Compliance Arrangement

All FMCs have to maintain appropriate compliance arrangements that aligned with the complexity, scale and nature of the company’s operations. RFMCs can consider setting up an independent compliance function, having compliance support from overseas affiliate or outsource their compliance function. A/I LFMCs (with AUM ≥ S$1b) and Retail LFMCs should appoint eligible individuals to form an independent, non-conflicting compliance function.

4. Auditing Requirements

FMCs have to meet the MAS’ expectations by performing adequate internal audits, which constitute part of the annual reporting requirements. The company shall meet the internal audits requirements by having an internal audit team, appointing someone from the head office or even outsourced to third-party service provider.

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