Guidelines on Licensing, Registration and Conduct of Business for Fund Management Companies [SFA 04-G05]

The Monetary Authority of Singapore (MAS) has published a revised version of its guidelines on the „licensing, registration and conduct of business for Fund Management Companies“. The guidelines outline the criteria which need to be met in order to register as a licensed fund management company, registered fund management company, and as venture capital fund managers. They also specify the registration process and set out the requirements to conduct business including reporting, disclosure, or valuation requirements.
This latest revised version contains eight key modifications apart from numerous editorial and technical changes, namely:
(1) Modification to appendices: Appendix A4 on notifications and approvals and Appendix A5 on periodic returns were removed. Previous Appendices A6 and A7 on documents required for licensing and registration and on requirements for venture capital fund managers, respectively, were renamed as new Appendices A4 and A5, respectively.
(2) Modifications relating to the „Criteria for Licensing or Registration“: Specifically, various changes were made to point 3.3 specifying criteria that would disqualify a person for a fund management licence or registration to newly include:
– a person that sets up fund structures that merely serve as a conduit for the offer of funds managed by other fund managers and
– a person that „ultimately invests in assets that are not capital markets products (nonCMPs). Persons investing in non-CMPs on behalf of accredited or institutional investors may consider if they are able to rely on licensing exemptions in the Second Schedule to the SF(LCB)R.
Please also note that MAS has renumbered the provisions under point 3 relating to the criteria for licensing and registration.
(3) Further modifications relating to the „Criteria for Licensing or Registration“: MAS has now included provisions to require that FMCs commence fund management business within six months of being issued a licence or registration; otherwise the approval will lapse.
(4) Modifications to the fit and proper requirement under point (3.7): MAS clarifies that „experience in the marketing, client servicing and advisory of financial services and products may be considered relevant but is not sufficient on its own“ to satisfy the fit and proper requirements of fund managers.
(5) New point (3.9) as regards the external involvements of key individuals: MAS has inserted this point to state that „CEOs and executive directors are
expected to focus on the management of the FMC’s business and may be required to divest outside business interests, if they are unable to adequately mitigate the conflicts of interest (whether actual or perceived), or reputational risks posed to the FMC“.
(6) Modifications to point (3.11) as regards the anchoring of key individuals: MAS has enclosed a new statement to require that „FMCs should minimise the shareholding held by passive shareholders (whether direct, intermediate or ultimate) who are not involved in the management of the FMC’s business, and/or do not have relevant experience in fund management“.
(7) Modifications to point (4.1.4) relating to ongoing requirements for FMCs (other than VCFMs), specifically disclosure requirements: MAS has added several provisions to clarify the minimum content of disclosures to clients, namely – as quoted:
Disclosures should, at the minimum, cover the following:
– the investment policy and strategy, as well as risks associated with the strategy and the assets in the investment portfolio. For instance, where FMCs invest in digital assets, they should minimally disclose the following:
– the heightened price, liquidity and volatility risks associated with digital assets;
– the risks associated with the use of intermediaries such as trading platforms and custodians. FMCs should segregate customers’ assets and store bulk of the assets in cold wallet and only keep assets in hot wallet for the purpose of liquidity and operational needs. Disclosure of the custody arrangements should include the jurisdiction in which the custodians are suitably licensed, registered or authorised; and
– any other regulatory and legal risks that are associated with
investments in digital assets;
(8) Insertion of new point (4.7) again relating to ongoing requirements: The new provision requires that FMCs must actively engage in managing the funds they oversee. Examples of instances where certain activities might not be considered substantive fund management are provided in points (3.3) and (3.4) of the document. To show they’re effectively managing these funds, FMCs need to maintain proper documentation as evidence of their active involvement in handling each segregated mandate or fund they manage.
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Please note: As these are only the key modifications made in the document, please refer to the original document for more detailed, comprehensive information.