What is a Collective Investment Scheme (CIS)?
A Collective Investment Scheme is an arrangement in respect of any underlying investments/assets which satisfies the following elements:
- Participants have no day-to-day control over management of the underlying investments.
- Either or both characteristics are present:
- The underlying Investments are managed as a whole by or on behalf of the manager;
- Participants’ contributions are pooled, and profits/income from which payments are to be made are pooled.
- (Purported) purpose or effect of the arrangement is to enable participants to participate in or receive profits/income arising from the investments.
In Singapore, a CIS can take various forms, such as unit trusts, exchange-traded funds (ETFs), real estate investment trusts (REITs), and private equity funds. The definition of CIS is outlined in Part 1, Section 2 of the Securities and Futures Act (SFA).
CIS’ comprise a large portion of the publicly traded market today, with particular reference to ETFs. Investing in a CIS offers investors the benefit of having access to expert, professional Investment managers who are able to leverage off the scale of investors in their CIS to carry out efficient portfolio management activities. However, risks such as market fluctuations, management quality, liquidity limitations, and high fees must be considered. It’s crucial to evaluate costs, fund performance, and the potential impact of interest rates and inflation. Proper research can help mitigate risks and maximize returns.
Classification of Collective Investment Schemes in Singapore
In Singapore, CIS’ are categorized into four regimes: Authorized , Recognized, Exempted, and Restricted. The offer of units in an Authorised or Recognised CIS is done via a Monetary Authority of Singapore (MAS)-registered prospectus and product highlights sheet, where the Authorisation/Recognition is effected through the Offers and Prospectuses Electronic Repository and Access site (OPERA). The regimes provide for specific categorisation of the investor types for such CIS’. Authorized (Constituted in Singapore) and Recognized (Constituted outside Singapore) schemes are primarily designed for retail investors, whereas Exempted and Restricted CIS’ cater to Accredited and Institutional investors.
For a Foreign CIS to be Recognised in Singapore, the laws and practices of the CIS’ jurisdiction must offer protections for investors in Singapore that are equivalent to those provided by Authorized CIS’. Furthermore, the CIS’ manager must be licensed or regulated in its primary place of business, and a representative must be appointed in Singapore. These conditions ensure that only CIS’ with transparent information and strong risk management practices are accessible to the public.
Exempted Offers and Restricted schemes are tailored for Accredited and Institutional Investors who are considered to possess the financial acumen and ability to handle higher investment risks. As such, these types of CIS are subject to lighter regulatory oversight. Exempted Offers are not required to undergo the standard authorization/recognition process or register a prospectus. These include:
- small offers, where the total amount raised is S$5 million or less within a 12-month period;
- private placements made to no more than 50 persons in 12 months; and
- offers targeted to Accredited/Institutional Investors as aforementioned.
However, these offers must comply with certain conditions, including restrictions on advertising and the requirement to disclose the nature of the offer, as per Subdivision 4 of Division 2, Part XIII of the Securities and Futures Act (SFA).
Restricted CIS’, which are only available to “relevant persons” (as defined in section 305(5) of the SFA) or investors committing at least S$200,000 per transaction, are exempt from Authorization, Recognition, and prospectus registration requirements, subject to certain conditions. These CIS must notify the MAS via the CISNet portal to be included in the restricted schemes list. To be included, the offer must contain an information memorandum, and the CIS’ manager must be licensed and deemed fit and proper.
Restricted Non-Capital Market Product CIS, which do not invest in capital markets products, are not required to have a licensed manager, and thus are not included in the restricted schemes list. If these CIS have a licensed manager, they can be added to the restricted schemes list by submitting the required online notification. Additionally, to maintain their exemption status, all restricted CIS must submit an annual declaration every 12 months.
Why Choose Curia Regis?
At Curia Regis, we understand the complexities surrounding the offers of CIS’ and their reporting requirements, which also includes providing data to the MAS via the relevant Asset Management surveys that need to be populated from time to time. We can support you with registering your CIS in the appropriate manner and to assist your regulated business with providing accurate and timely responses to such surveys, as part of our Ongoing Compliance support function.
Feel free to reach out to us for personalized assistance and we’ll help you navigate these complexities with ease.
