Singapore Strengthens its Fund Presence
Yang Eu Jin and Tan Choon Leng
Current Regulatory Regime for FMCs
FMCs are currently divided into two categories: licensed FMCs and exempt FMCs. All FMCs must apply to the MAS for a capital market services (CMS) licence, unless they fall under an exemption in the regulations under the Securities and Futures Act (SFA), which is the principal legislation governing
FMCs and other financial institutions in Singapore. A key exemption that is frequently used caters to FMCs with no more than 30 qualified investors. If an FMC is unable to qualify under an exemption, it will have to obtain a full CMS licence; a boutique CMS licence or a start-up boutique CMS licence. The licensing required depends on the category of investors it serves and its track record. For example, if the FMC is targeting retail investors, a full CMS licence is required. If the FMC only intends to serve accredited investors, it can apply for a boutique CMS licence, provided it also has a track record of at least three years. If the FMC intends to serve accredited investors but does not possess the requisite track record, it should apply for a start-up boutique CMS licence, under which the FMC will initially be limited to serving 100 qualified investors.
Proposed Changes to the Licensing Regime
The consultation paper proposes to reclassify FMCs into three categories:
(1) Notified FMCs;
(2) Licensed accredited/institutional (A/I) FMCs; and
(3) Licensed retail FMCs.
The notified FMC classification is the most basic category, allowing the FMC to have up to 30 qualified investors, no more than 15 of which can be funds, but limits its assets under management (AuM) to S$250 million, with a minimum paid-up capital of S$250,000. Furthermore, they must fulfil certain personnel requirements and provide a demonstration of commitment to the MAS. It is unclear when would be the relevant time for assessment of AuM and whether the amount is computed at inception, annually or throughout the lifetime of the fund. The MAS has stated that FMCs should initiate discussions with them if there is a reasonable expectation that the AuM will exceed S$250 million on a permanent basis. It is hoped that more clarity on the above issues will be issued by the MAS in due course, particularly regarding the point at which notified FMCs should start upgrading their licences to the next category.