The Consultation is aimed to address the current disparity between the Registered Fund Management Companies (“RFMC”) and Capital Market Services License (“CMS”) holders for Fund Management (“LFMC”), and to effectively consolidate the 2 different regimes. This effectively then removes the different regulatory mechanisms, timelines, requirements, and filing channels – making it easier for the market to understand their obligations under one overarching regulatory framework.
Transitional Arrangements
To provide clarity and certainty to market participants, MAS has outlined the following timelines and information:
- Repeal of RFMC Regime: The repeal of the RFMC regime will come into effect on 1st August 2024.
- Transition Period: Existing RFMCs that intend to continue providing regulated fund management services will be given a transition period between 1st April 2024 and 30th June 2024 to apply to be an Accredited and Institutional- Investor LFMC by completing and submitting Form 1AR (“Form”).During, this period, MAS may request for additional information to which RFMCs should reply on a timely basis to facilitate a smooth transition.
- MAS will inform RFMCs of the outcome of their application within a month of submission. MAS expects to issue CMS licences to all successful applicants by end July 2024.
- RFMCs who are subsequently licensed will transition their exempt representatives to appointed representatives on the same date as the RFMC’s licensing approval.
- MAS will publish the names of these appointed representatives on the MAS’ Register of Representatives, using information provided by RFMCs in their Form 23A notifications to MAS.
- It is important to ensure that all representative information is up to date as per the latest Form 23A notification to MAS. RFMCs are responsible for ensuring the accuracy of representative information on the MAS Register by promptly updating any changes before licensing.
- Prior to licensing, RFMCs must ensure that all representatives meet the requirements outlined in the Notice on Minimum Entry and Examination Requirements for Representatives of Holders of Capital Markets Services Licence and Exempt Financial Institutions (SFA 04-N09).
Consideration factors in reviewing Form 1AR applications
MAS will approve an RFMC’s application to be an A/I LFMC if the RFMC:
(a) has managed assets attributable to third-party investors in the six months immediately preceding the submission of the Form to MAS. This requirement does not apply if the RFMC is registered for six months or less as at the submission date;
(b) submits the Form within the stipulated timeline; and
(c) satisfactorily furnishes supporting documents to MAS, if requested.
Continuity of operations and applicable requirements during and after application
During the application process for licensing as LFMCs, RFMCs can operate without interruptions. RFMCs must still adhere to their existing regulatory obligations, such as filing notifications and annual declarations. It is highly recommended that RFMCs acquaint themselves with the additional regulatory obligationsts for LFMCs before obtaining their license. Once licensed, LFMCs must immediately comply with their updated regulatory requirements, including obtaining prior approvals for relevant business changes to their LFMC and submitting quarterly regulatory filings.
Unsuccessful Form 1AR applications
Under existing legislation, RFMCs which have not conducted fund management activity for a continuous period of six months prior to the submission of the Form will cease to be registered as RFMCs. They would no longer be allowed to carry on any regulated fund management activity.
Communication with investors
RFMC, should always prioritize the interests of their investors and maintain transparency in their operations. Considering this, RFMCs should assess whether informing their investors about the repeal of the RFMC regime will benefit said investors.
In a similar vein and to reiterate an earlier point, RFMCs that fail to secure licensing before the repeal date will lose their regulatory authorization to conduct fund management activities.
Specific Restrictions and Requirements on A/I LFMCs Transitioned from RFMCs
Clarification on Asset Under Management (AUM) Cap
MAS has noted that the majority of RFMCs operate with assets well below the AUM Cap of S$250 million of managed assets, typically managing smaller asset pools with simpler internal controls and staffing structures. The AUM Cap acts as a protective measure until MAS determines that the FMC is prepared to manage larger asset volumes. MAS will conduct a review if an RFMC seeks to lift the AUM Cap after obtaining its license.
MAS will consider factors that include but are not limited to the FMC’s regulatory compliance record, the FMC’s internal controls, risk management and compliance arrangements, stability of the FMC’s Board of Directors, Chief Executive Officer and senior management team and extent and nature of changes to the FMC’s business model and investment strategy.
MAS will not impose the AUM Cap on applicants that apply to be A/I LFMCs via the regular application process using Form 1A, as this would have already taken into accord the likelihood to handle such growth.
Legislative Amendments & Implementation Plan
Transition support.
RFMCs are urged to consider engaging professional compliance service providers or legal advisors with expertise in regulatory obligations for A/I LFMCs if they need assistance. Additionally, RFMCs should promptly enhance their internal policies and processes to meet the additional regulatory requirements, such as heightened reporting frequency for A/I LFMCs.
Treatment of ongoing RFMC applications
As of 1st of January 2024, MAS ceased accepting new RFMC applications. However, MAS will continue to assess RFMC applications received before this date. If approved, applicants will be required to submit the Form and will be licensed as A/I LFMCs with the AUM Cap, even if their initial application was for RFMC status.
Overall, the repeal of the regulatory regime for RFMCs marks a significant step towards greater clarity for Singapore’s fund management landscape. However, such change needs to take into accord the difficult balancing act of not setting too high a benchmark for prospective fund managers that are interested in setting up a Singapore fund management company, while fostering a conducive environment for fund managers to thrive while maintaining high regulatory standards.
How Can We Help?
Our dedicated team based in Singapore is instrumental in guiding organizations through the transition from RFMCs to A/I LFMCs. We can assist you with the transition, as well as support you with the additional regulatory requirements that you would be exposed to as an A/I LFMC.
We offer comprehensive regulatory compliance support, along with tailored assistance in crafting policies and procedures, providing ongoing compliance support and conducting regular internal audits to align your business model and regulatory requirements with that of the MAS, while ensuring that you are always commercially sound.
Reach out to us today at [email protected] to discover how we can help you face such a transitions, or if you’d like to like to understand how you will be impacted by this change.
