15 August, 2012


Legal News & Analysis – Asia Pacific – Singapore – Regulatory & Compliance


The Monetary Authority of Singapore (“MAS”) has announced that the  implementation of the enhanced regulatory regime for fund management companies (“FMCs”) will take effect from 7 August 2012.
The implementation of the new regime is the culmination of a series of industry consultations undertaken by the MAS since April 2010. 
To recapitulate, the current exempt fund manager (“EFM”) regime will be phased out. Conditions for the exemption have been tightened and fund managers seeking to rely on the exemption are now restricted to managing no more than S$250 million, and serving no more than 15 funds or limited partnership fund structures amongst the 30 qualified investors which they are permitted to serve (“RFMCs”). In addition, a new registration process has been put in place and instead of the
previous notification of commencement of business within 14 days of commencement of business, registration with MAS is now a condition for exemption.
The new regime also introduced a new intermediate category of fund management licensing. Under this new category (“A/I LFMCs”), FMCs are restricted to serving qualified investors only, but unlike the RFMCs, are not otherwise subject to any constraints on the number of investors or assets under management. FMCs which wish to expand beyond the limits prescribed in relation to RFMCs and which do not intend to target the retail industry may consider such licence as the qualifying criteria is less onerous than that for FMCs serving all types of investors (including
retail investors) (“Retail LFMCs”)
In addition to the above, the changes implemented includes enhanced business conduct and capital requirements which will be imposed on all FMCs. These changes are discussed in greater detail below.
To give effect to the enhanced regime, the Financial Advisers Regulations (Cap. 289, Rg 2), the Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licences) Regulations (Cap. 289, Rg 10) and the Securities and Futures (Licensing and Conduct of Business) Regulations (Cap. 289, Rg 13) have also been amended.
  •  Competency of Key Individuals: New requirements prescribed in relation to minimum number of directors, professionalsand representatives, as well as the experience and residency of such persons.
  • Base Capital: Components of “base capital” clarified and minimum base capital prescribed. Such base capital must be maintained on an ongoing basis with sufficient additional capital buffer and ranges from S$250,000 to S$1,000,000.
  • Compliance, Risk Management and Audit: New requirements for (a) compliance arrangements commensurate with the scale, nature and complexity of the FMC’s business; (b) adequate risk management framework to identify, address and monitor risks associated with the customer assets that the FMC manages; and (c) internal and independent annual audits. The new requirements emphasises robust support functions in key areas.
  • Ongoing Business Conduct Requirements: These previously applied only to capital markets services licencees. Pursuant to the changes, RFMCs and their representatives will also be subject to specified ongoing business conduct requirements notwithstanding their exempt status. In addition, business conduct requirements pertaining to inter alia custody of assets under management, valuation and reporting, mitigation of conflicts of interest, notifications and approvals, and periodic returns have been enhanced. The higher standards would facilitate a more substantial fund management platform with greater investor protection.
  • Meaning of “qualified investor”: The meaning of “qualified investor” has been amended to include “institutional investors (other than collective investment schemes) and limited partnerships (where the limited partners comprise solely of accredited investors or institutional investors). Previously, “qualified investor” referred generally to an accredited investor or fund whereby the underlying investors are accredited investors. Pursuant to the new amendments, RFMCs can now serve institutional investors as well. Interestingly, the extension of the definition is only with respect to institutional investors as that term is defined under the SFA but does not cover the equivalent foreign definition of an institutional investor. 
  • Real estate and infrastructure fund managers: Apart from  the RFMC regime, a new exemption has been introduced in respect of fund managers managing on behalf of qualified investors, assets comprising securities or interests of  corporations or entities where the sole purpose of such corporations or entities is to hold immovable assets.
Existing EFMs will have six months from 7 August 2012 to register as a RFMC or to apply for a capital markets services licence should they exceed or anticipate that they will exceed the limit of S$250 million prescribed for RFMCs. EFMs can continue to conduct fund management for no more than 30 qualified investors until informed of the outcome of application or registration. During this interim period, EFMs should also continue to comply with continuing obligations such as notifying MAS of any change in particulars or filing of its annual declaration. Conversely, EFMs which do not meet the admission criteria for RFMCs or licensed FMCs will have to cease operations upon being notified accordingly by MAS.
Corporate e-Lodgment system MAS has implemented a new online submission system, known as the Corporate e-Lodgment system (“CEL”) for all FMCs. This replaces manual submissions of hardcopy forms in respect of certain submissions and applications, including registration as a RFMC, application for a capital markets services licence for fund management and specified regulatory returns, notifications or applications for approvals.
For more information on the new regulatory regime as well as the consultations leading to the changes, please see the following:
1. MAS’ press statement “MAS Implements Enhanced Regulatory Regime for Fund
Management Companies” dated 6 August 2012
2. MAS’ Guidelines on Licensing, Registration and Conduct of Business for Fund
Management Companies (issued on 7 August 2012)
3. MAS’ first consultation paper “Review of the Regulatory Regime for Fund Management Companies and Exempt Financial Intermediaries” of April 2010
4. MAS Response to Feedback Received – Consultation on Review of the  Regulatory Regime for Fund Management Companies and Exempt Financial Intermediaries
5. MAS’ second consultation “Proposed Enhancements and Draft Legislative Amendments to Give Effect to the Regulatory Regime for Fund Management Companies ” of September 2011.




For further information, please contact:


Eric Chan, Director, Drew & Napier 

[email protected]


Petrus Huang, Drew & Napier
Farhana Siddiqui, Partner, Drew & Napier


Sean Ng, Partner, Drew & Napier


Kenneth Chee, Partner, Drew & Napier


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