Author: JengaBCG
Guide:In recent years, Singapore has vigorously developed its financial industry. With its competitive and transparent tax system, no capital gains tax, tax exemptions and incentives specifically for funds, efficient legal system and convenient business environment, it has attracted investors from all over the world to implement their business investment plans in Singapore.Singapore’s asset management license and application requirements in 2024Provide analysis for investors who are interested in conducting asset management business in Singapore.
Singapore's financial industry implements mixed operations and unified license management. The Monetary Authority of Singapore (MAS) is the core of Singapore's financial regulatory system. It was established in 1971 and has the dual responsibilities of central bank regulation and supervision of financial industries such as banking, securities, and insurance. It is also the entity responsible for the overall access to the financial industry and the registration of financial institutions.
According to MAS, there are 11 types of financial business licenses in Singapore:
among them,Securities, Futures and Fund ManagementThat is Singapore asset management (abbreviated as "asset management"). Asset management business activities are subject to the constraints and jurisdiction of Singapore's Securities and Futures Act (SFA), which is a set of regulations regarding markets, market operators, settlement services, intermediaries and representatives.
Therefore, if you want to start an asset management business in Singapore, you first need to register aprivate limited companySecondly, if a company wishes to carry out activities regulated by the SFA, it must apply to the Monetary Authority of Singapore (MAS).Asset Management License, also known as the Capital Market Service License (CMS license).
01 Who needs to apply for CMS?
The MAS stipulates that companies engaged in asset management business under the Securities and Futures Ordinance must hold a CMS license. According to MAS official requirements, the following businesses need to apply for a CMS license:Seven categories :
- Dealing in capital markets products
- Advising on corporate finance
- Fund management
- Real estate investment trust management
- Product financing
- Providing credit rating services
- Providing custodial services for securities
Among them, capital market products include: securities, collective investment schemes, over-the-counter derivatives, exchange-traded derivatives, and spot foreign exchange for the purposes of leveraged foreign exchange trading. According to the relevant business, the entities that need to apply for a CMS license are:CompanyFinancial advisors, securities brokers (including equity crowdfunding operators), credit rating agencies, fund managers, real estate investment trust managers.
02 Who can be appointed as a CMS representative?
At the same time, SFA stipulates that CMS licenses can only be granted toCompany EntityIf the companyPractitionersIf you need to act as a representative of a CMS licensed company in the above regulated activities, you need to be designated asRepresentativeCMS Representatives can be designated, temporary or ad hoc - designated representatives are employees or agents who carry out regulated activities on behalf of the company; ad hoc representatives are experienced individuals who move to Singapore from overseas and are eligible for3-month grace periodTo meet the relevant examination requirements; temporary representatives can be employees of your affiliated companies based overseas who are designated to carry out regulated activities on behalf of your company for a limited period of time.
The individual appointed as a representative must meet the following criteria:
A.At least 21 years old;
B. Have the basic educational qualifications and meet the examination requirements in Notice SFA 04-N09;
C. Meet the selection criteria specified in FSG-G01 “Guidelines on Appropriate Personnel Criteria”.
Article B stipulates that representatives engaged in securities business, fund management, real estate investment trust fund management and other activities must participate inCMFASPractitioner Licensing Examination(licensing examinations for the Capital Markets and Financial Advisory Services in Singapore),
The specific examination subjects for practitioners, i.e. CMS representatives, are as follows:
1. The CMFAS examination required to perform regulated activities as a representative of an approved exchange member:
It is worth noting that CMFASIf part of the examPossess certain qualifications and work experienceCan seekPartial exemptionFor example, if the practitioner holds a degree in finance, economics, accounting, business administration,If you have a degree in finance, wealth management or other related majors, or hold a Chartered Financial Analyst (CFA) or Association of Chartered Certified Accountants (ACCA) certificate, you can be exempted from the M6 part of the exam.
For example, if you are an OTC derivatives practitioner with a degree in finance and will be engaging in business activities on behalf of an approved exchange member, you only need to pass the M1B exam to engage in relevant SFA-regulated activities as a representative of a CMS licensed company. Please consult Jenga for details.
03 CMS application conditions and requirements
Any company engaged in the SFA-regulated business mentioned above needs to apply for a CMS license unless exempted. The following entities are exempt from holding a CMS license:
1. Banks, merchant banks, finance companies and insurance companies are not required to obtain a CMS license; these entities are already regulated by the Monetary Authority of Singapore (MAS) under separate laws.
2. An individual acting on behalf of an exempt person (i.e. a person who is exempt from holding a CMS license).
3. An individual acting on behalf of a CMS licensee who provides custody services for securities or securities financing.
4. An individual who is an employee of a bank or commercial bank and has registered as an associate partner of Singapore Exchange Derivatives Trading Limited.
In comprehensively assessing all CMS licence applications from companies, the HKMA will consider the following factors:
At the same time, there will be different financial requirements for different CMS license applicants:
04 Fund Management Company License Categories & Requirements
Among the above businesses that require a CMS license, most are companies whose main business activities are fund management, i.e.Fund management companyFund management remains one of the main regulated activities in Singapore. In Singapore, fund management companies (FMCs) are regulated by the Securities and Futures Act (Chapter 289). In order to carry out regulated fund management activities, fund management companies must register as relevant company types or obtain relevant licenses from the Monetary Authority of Singapore.
In previous policies, Singapore FMC can be further divided into Licensed Fund Management Company (Licensed FMC, "LFMC") and Registered Fund Management Company (Registered FMC, "RFMC"). On October 2023, 10, the Monetary Authority of Singapore issued a public consultation to abolish the existing Registered Fund Management Company ("RFMCs") system to simplify the existing regulatory framework for fund managers. RFMCs already in operation will be approved to change to Licensed Fund Management Companies ("LFMCs") after submitting relevant applications to the Monetary Authority of Singapore.
After the abolition of the RFMC system, the only fund management company licenses in Singapore are licensed fund management companies (LFMCs), includingA/I LFMC (Qualified Investor LFMC)和Retail LFMC,as well as“Venture Capital Fund Manager” (“VCFM”)For the latest specific classification of fund management companies and government-approved business activities, please refer to the following table:
·RFMCReasons for abolition and follow-up
The RFMC system, which allows fund management activities to be carried out without holding a CMS license, was introduced in 2012 after the abolition of the Exempt Fund Manager (EFM) system. Existing EFMs at the time could choose to become LFMCs or RFMCs as a transition.
MAS also mentioned the reasons for the abolition of RFMC in the official document released:
Since the introduction of the RFMC regime, the fund management industry has grown rapidly in terms of the number of participants and the breadth of fund products, and has matured. Most of the former EFMs that still operate as regional fund management companies have adapted to the regime. With their continued growth in recent years, these companies have basically upgraded to A/I LFMCs. In addition, most new companies seeking to conduct fund management in Singapore also prefer to apply to become A/I LFMCs rather than RFMCs.
Therefore, MAS believes that given that the number of RFMCs has remained relatively stable in recent years, this system has achieved its purpose of helping the previous EFMs to make a smooth transition and should therefore be abolished in due course to streamline the regulatory regime.
MAS will stop accepting new RFMC registration applications from January 2024, 1. If existing RFMCs want to continue operating, they need to submit application forms within the prescribed time to apply for a CMS license and convert to A/I LFMC before the RFMC system is abolished. When converting from RFMC to A/I LFMC, MAS will retain the S$1 million asset management limit for the relevant companies. After converting to A/I LFMC, if they have plans to expand their asset management scale, they can apply to MAS to increase this cap.
LFMC refers to a fund management company that has obtained a CMS license. LFMC includes A/I LFMC (Qualified Investor LFMC) and Retail LFMC (Retail LFMC):
- A/I LFMC can only provide fund management services to qualified investors, but there is no limit on the number of qualified investors;
- Retail LFMC is able to provide fund management services to any type of investor.
Requirements for Registered Fund Management Company (LFMC):
VCFM Venture Capital Fund Manager
In October 2017, Singapore’s Monetary Authority introduced a relatively lightly regulated “Venture Capital Fund Manager” (VCFM) regulatory system to promote the development of Singapore’s early-stage venture capital industry.
As an asset manager registered with the Singapore government, qualified VCFMs are no longer required to have at least five years of relevant experience in asset management as directors and representatives of VCFM managers. They have the advantages of a convenient application process, no benchmark capital and asset management scale requirements, and relatively controllable operating and compliance costs.
VCFMs will not be required to comply with certain rigid obligations regarding third-party independent valuation of fund assets, internal compliance functions, internal audits, etc., and will generally only need to comply with the following ongoing compliance requirements:
05 Fund Management License Application
What kind of license the manager should apply for depends mainly onThe types of funds managed or provided by the manager.
⑴ Apply for Retail LFMC license
The manager manages an open-end fund that is authorized to publicly issue fund interests to retail investors in the secondary market. The manager needs to apply for a Retail LFMC license;
⑵ Apply for A/I LFMC or RFMC license
Managers manage closed-end funds, or open-end funds that issue equity only to qualified investors. Given that public LFMCs operate (depending on the expected total assets under management), these funds usually only raise funds from experienced high-net-worth investors or institutional investors.
⑶ Apply for VCFM license
Managers that manage closed-end funds and mainly invest in securities of non-listed companies in the start-up stage may give priority to applying for a VCFM license (the VCFM regulatory system significantly reduces and simplifies the license application qualification requirements and approval process, and significantly reduces subsequent compliance costs).
The Monetary Authority of Singapore may need up to6MonthIt takes time to review applications for RFMC, A/I LFMC and Retail LFMC, while the review time for VCFM is about 4 months.
Your application may take longer if:
- The applicant does not fully meet the relevant admission criteria, or
- Have a unique and complex business model, or
- Not submitting all required forms, information and documents with the initial application.
Applicants should also expect a longer review period if they make significant changes to their initial application. In such cases, MAS may require a resubmission, so be well prepared.
At the end of the review process, MAS will issue an In-Principle Approval (IPA) to the successful applicant, who will have up to 6 months to meet the requirements of the IPA. These requirements usually involve providing certain commitments, replenishing share capital or appointing certain key personnel. The timeline for this stage depends on how quickly the applicant meets the requirements.
06 Q&A session
Q: What application materials do I need to submit to increase my chances of getting a license?
(1) The applicant should provide a detailed description of the business model and business plan, including whether the management team has professional experience and skills, the investment strategy to be adopted, the assets and markets to be invested, the profile of potential investors, and the profit distribution plan;
(2) clarify the risk management, compliance and audit arrangements that are consistent with the nature of the proposed fund;
(3) For applicants that are members of a global fund management group, the applicant’s identity and status in Singapore and the services it can provide to the group’s affiliated companies (if applicable) must be clearly stated;
(4) Documentary evidence that the applicant is able to meet the minimum base capital and financial requirements, including ACRA’s business profile report and latest audited financial statements;
(5) If the applicant or its affiliates have been subject to relevant regulatory measures before, it is necessary to assess the impact of the regulatory measures and explain what actions have been taken to lift such regulatory measures and analyze the root causes of regulatory violations;
(6) The applicant shall provide appropriate statements from its shareholders, directors and representatives;
Q: If I successfully apply for a fund management license but have not put it into use, will it become invalid?
If a fund management company fails to carry out fund management business within 6 months from the date of obtaining the CMS license/registration as a fund manager, its CMS license or registration status will become invalid.
Once the CMS license or registration status expires, MAS will remove the FMC from the list of financial institutions. To avoid third parties from believing that the FMC still holds a valid license, MAS will require the FMC not to retain any physical document records that can show the validity of the license, such as the license registration certificate and license permit, and not to advertise that it can carry out any regulated activities.
Q: If my company already holds some regulated activitiesI have a CMS license, but I want to add other regulated businesses. How do I apply for the license?
If a company already holds a CMS license for certain regulated activities and wishes to add another SFA-regulated activity to its license, it should submit Form 5 in accordance with SF (LCB) R. At the same time, the licensed company needs to appoint a representative to carry out the relevant regulated activities. CMS licensed companies and their representatives must comply with the relevant capital and operating requirements of the Securities and Futures Act for regulated activities.