Martin Lee @ Sg
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Proposed Enhancements to the Regulatory Regime for Fund Management Companies and Exempt Financial Intermediaries

MAS yesterday released a consultation paper pertaining to revamp of the licensing requirements of fund management companies (FMCs).

Currently, persons conducting regulated activities in Singapore under the SFA are required to obtain a Capital Markets Services [“CMS”] licence.

regulatory-regime-for-fund-managersThe Second Schedule to the SF(LCB)Regs provides exemptions from the need to hold a CMS licence for companies conducting fund management, leveraged foreign exchange trading and advising on corporate finance. For example, FMCs who notify the Authority that they are serving not more than 30 qualified investors may be exempted from licensing.

Under the proposed business conduct requirements, there will be three categories of FMCs:

1) Notified FMCs

FMCs whose Assets under Management [“AUM”] are not more than S$250 million, and who serve not more than 30 qualified
investors, of which not more than 15 are funds. The underlying investors of such funds will have to be accredited investors. No formal approval from the authority will be required for this category of FMC.

2) Licensed A/I FMCs

This refers to licensed FMCs who serve only accredited and/or institutional investors. The Authority clarifies that the underlying investors of funds managed by Licensed A/I FMCs will also have to be accredited investors and/or institutional investors. FMCs whose AUM are less than S$250 million may also apply for a CMS licence under this category, provided they meet all admission criteria.

3) Licensed Retail FMCs

Licensed FMCs who serve retail (i.e. non-accredited and non-institutional) investors. The shareholder of, or the financial group
to which the prospective Licensed Retail FMC belongs, will be required to have corporate track record of operating a regulated entity conducting fund management in an equivalent jurisdiction for at least five (5) years, and a global AUM of at least S$1 billion.

I find it an irony that while the requirements for operating a fund catering to retail investors is quite high, any tom, dick and harry can easily open a company selling “investment products” like gold, wine, land to retail investors without the need to comply to any regulation.

The full consultation paper can be found below:

Review of Regulatory Regime for Fund Management Companies and Exempt Financial Intermediaries

Annex A of Consultation Paper

Any feedback can be sent to [email protected] or 6225-4063 (fax) by 31st May 2010.

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