Fund Management Company FAQ
How does one become a Fund Manager in Singapore?
Fund Management is a regulated activity governed by the Monetary Authority of Singapore (“MAS”). Please see the link to our article and infographic which gives the detailed requirements and differentiation between the various types of fund management regime in Singapore. For more on fund management company FAQ:
I want to manage client money in Singapore. Do I need to be regulated?
Management of investments for clients is very popular in Singapore and is popularly referred to as the External Asset Management (“EAM”) model. This required the entity performing this activity to be regulated as a fund manager by the MAS. Please see the link to our article which details out this model below
Do you need to register or get approval from MAS to offer funds to investors in Singapore?
Offers of any fund can be made to retail investors or be made on a private basis. Offers in general, can only be made if:
- full prospectus has been registered with MAS and in the case of collective investment schemes, the scheme is authorised or recognised by the MAS; or
- the offer falls within one or more of the safe harbours prescribed in the Securities Futures Act
Some of the safe harbour rules are:
- Private placement – offer fund to maximum of 50 persons in any 12 month period
- Institutional Investor – offer fund to institutional investors such as licensed banks, licensed companies or pension funds
- Relevant persons – offer fund to accredited investors or to any persons making a minimum subscription of S$200,000
Can fund managers regulated in Singapore market their funds under their current licence?
Regulated fund managers in Singapore who engage in marketing of funds are considered to be dealing in capital markets products that are units in a collective investment scheme (“CIS”). However, fund managers are typically exempted from the need to add dealing in capital market products if they market the funds that they manage or funds managed by their related corporations.
Can a Company who intends to set up an office in Singapore to market funds to end investors be licensed or regulated as a fund manager in Singapore?
To qualify for licensing or regulation in Singapore as a fund manager, Company must perform substantive fund management activities such as portfolio management, investment research or trade execution. Marketing of funds activities would typically require the Company to apply for capital markets services licence dealing in capital market products.
Fund managers who are intending to apply for licence or registration to operate as a fund manager in Singapore need to show that their directors have relevant experience to conduct their duties. Does MAS consider proprietary investments as relevant experience?
MAS does not consider investing in one’s own money as relevant experience in the context of the fund manager that is seeking to manage monies for third parties.
Fund managers who are intending to apply for a licence or registration are required to appoint independent custodian and fund administrator. Is this a requirement for fund managers who intend to manage private equity or venture capital funds?
The requirement to have independent custodian would not apply to private equity or venture capital (“PE/VC”) funds which are closed –ended funds offered to accredited and/or institutional investors. However, fund managers are required to disclose this fact to the investors, obtain their acknowledgement and provide investors with an audit report of the assets in each year. Fund managers must ensure customer funds are subjected to proper segregation.
PE/VC fund managers must ensure fund assets are subject to independent valuation and customer reporting by appointing independent fund administrators. Given the difficulty in arranging for PE/VC assets to be independently valued, valuation function can be performed in-house provided conflicts of interest are adequately dealt with.
Entities who are intending to operate in Singapore as a sub-advisor to other fund managers to conduct research and advisory functions would be required to be licensed as a fund manager or financial adviser?
Sub-advisors who are conducting research and advisory activities will be classified as a fund manager if:
- Sub-advisor has discretion over the construction of its clients’ portfolio;
- Sub-advisor or its key officers are able to exercise control over the client;
- Sub-advisor is named in the fund prospectus, offering documents or marketing materials; or
- Sub-advisor has full – knowledge of, or access to the holdings of the client’s fund or portfolio.
If sub-advisor does not fulfil the above, the entity would be required to be either licensed or exempted under the Financial Advisers Act.
Company which is intending to be licensed or registered as a fund manager in Singapore; do the directors, relevant professionals and representatives need to be employed by the Company at time of application to MAS?
Company must ensure it is able to meet the minimum application requirements prior to submission of application to MAS. However, in cases where individuals such as representatives and relevant professionals are still employed elsewhere at time of application, Company is able to provide a tentative start date for these individuals and provide their employment history to MAS.
Who should a financial institution (“FI”) conduct customer due diligence (“CDD”) checks on ?
CDD checks should be conducted on all customers. Customers refer to natural persons, legal persons or legal arrangements:
- With whom FI establishes or intends to establish business relations
- For whom FI undertakes or intends to undertake any transaction without an account being opened; or
- Who invests into an investment vehicle to which the FI provides regulated fund management activity but shall not include an investment vehicle which is an entity listed on SGX or an equivalent stock exchange, where the interest of the investment vehicle is distributed by a licensed/regulated FI or a primary manager is an FI that is subject to comparable AML/CFT standards set by FATF.
Who are defined as “legal persons” and what arrangements are defined as “legal arrangements”?
Legal persons refer to companies, bodies corporate, foundations, anstalt, partnerships,
joint ventures or associations. Legal arrangements refer to trust, fiducie, treuhand and fideicomiso.
How often should enterprise wide risk assessment (“EWRA”) procedures be conducted by a financial institution (“FI”) ?
EWRA should be conducted at least once every 2 years or when material trigger events occur, whichever is earlier.
How does an financial institution (“FI”) incorporate the results of Singapore National Risk Assessment (“NRA”) into their enterprise wide risk assessment (“EWRA”)?
The Singapore NRA in intended to give private sector a better understanding of the ML/TF risks in their own section, as well as other sectors that they have dealing with. Relevant high risk financial and non-financial sectors identified in the NRA report should be factored into their EWRA.
Prior to establishing a business relations, where financial institution (“FI”) has any reasonable grounds to suspect the assets or funds of customers are proceeds of drug dealing or criminal conduct, or are property related to the facilitation or carrying out any terrorism financing offence the FI shall not establish any business relations and file a suspicious transaction report (“STR”). What constitutes as reasonable grounds?
Reasonable grounds can include the following:
- Refusal by customer to provide, or inability to provide, complete CDD documents
- No match between source of funds and wealth with the investment amount
- Customer requests to make fund transfers that do not make economic sense
- FI identifies new information on customer which was previously not disclosed to FI
Are financial institutions (“FIs”) required to establish existence of the beneficial owner of a customer where the customer is a government-owned entity or a majority-owned subsidiary of a publicly listed company?
FIs are not required to establish beneficial owners of a customer that is a government-owned entity, whether local or foreign, unless the FI has doubts about the veracity of the CDD information, or suspects that the customer, business relations with, or transaction for the customer may be connected to money laundering / terrorist financing (“ML/TF”) activities.
How often should financial institutions (“FIs”) conduct ongoing monitoring of their customers?
Ongoing monitoring is a fundamental feature of an effective Anti-Money Laundering / Countering Financing of Terrorism (“AML/CFT”) risk management system. All FIs may conduct ongoing monitoring according to customer’s money laundering / terrorist financing (“ML/TF”) risk profile. Higher risk customers should be subject to more frequent periodic review (at least annually) to ensure CDD information previously obtained remains relevant and risk profile remains relevant.
What are some of the money laundering / terrorist financing (“ML/TF”) sources that financial institutions (“FIs”) can use to assist in screening their customers?
FIs may use commercial ML/TF databases to verify adverse information on individuals and entities. FIs should also refer to list of individuals and entities covered under the MAS Regulations in relation to United Nations Security Council sanctions or freezing of assets of persons and names provided in the Terrorism (Suppression of Financing) Act.
What are the minimum standards expected when financial institutions (“FIs”) conduct simplified due diligence CDD measures?
FIs may conduct simplified due diligence if they are satisfied money laundering / terrorist financing (“ML/TF”) risks posed by the customer are low. FIs must still be able to effectively identify and verify identify of the customer, any natural persons appointed to act on behalf of the customer and any beneficial owners where relevant. Screening should be conducted on all beneficial owners identified.
Who are defined as family members and close associates of Politically Exposed Persons (“PEPs”)?
Family member refers to parent, step-parent, child, step-child, adopted child, spouse, sibling, step-sibling and adopted sibling of the politically-exposed person.
In determining who close associates are, Financial Institution (“FI”) may consider factors such as level of influence the PEP has on such person or the extent of his exposure to the PEP.FI may rely on information obtained from public sources and information obtained through customer interaction.