Fund Management Company FAQ
1. 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:
2. 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.