What Are the Minimum Number of Directors Required for a Fund Management Company?
Introduction of Minimum Number of Directors Required for Fund Management
In Singapore, financial management companies (FCMs) are crucial since they watch out for grouped investment plans, custom options and big account pools used by expert and institutional customers. It is guided by the MAS fund management regulations under the Securities and Futures Act (SFA), and all people involved in this sector need a license or certificate from the Monetary Authority of Singapore (MAS).
Registering a fund management firm in Singapore requires thinking about the number of directors on the management team. The goals are compliance and spotlighting the strengths, background and impartiality of the fund manager’s leading employees.
The author explores what directors of different fund management companies must do, what is expected and the reasons behind the Monetary Authority of Singapore’s (MAS’) rules.
Types of Fund Management Companies in Singapore
Understanding what a fund management company is helps set the rules for becoming a director.
- Licensed Fund Management Companies (LFMCs): There are mainly two areas that researchers focus on when working with chemistry:
- Official permits allow Retail LFMCs to gather and maintain people’s retail financial assets.
- Accredited/Institutional LFMCs (A/I LFMCs) – can only invest money for people or companies that qualify as accredited or institutional.
- Registered Fund Management Companies (RFMCs): A VCC may handle investments for up to 30 qualified investors (15 funds) as long as the total fund capital is not over S$250 million.
There is a need for at least a certain number of directors in each kind of business.
Minimum Number of Directors Fund Management Company Must Have (Per MAS)
1. Licensed Fund Management Companies (LFMCs)
MAS regulations insist that an LFMC should always have at least two directors on its board.
Key conditions include:
- Both directors should be executive directors who take part in the daily operations of the fund management business.
- At least one executive director must be living in Singapore.
- The directors are required by MAS to be fit and proper and they both need experience in the field of fund management or similar work.
- In the retail LFMC sector, MAS may introduce extra obligations such as bringing in independent directors or improving the specific experience needed.
These conditions form part of the broader MAS licensed fund manager requirements, designed to ensure strong leadership, compliance, and industry competence within licensed fund management companies in Singapore.
2. Registered Fund Management Companies (RFMCs)
RFMCs fall under fewer regulations than LFMCs, but MAS requires all RFMCs to have at least two directors.
Key conditions include:
- The law states that an executive director, who must stay in Singapore, needs to serve as at least one director.
- Before being appointed, directors must have been employed in fund management and be sound and suitable.
- Depending on where they are based, RFMCs are not required to hold licenses, but how they function is closely inspected.
Fund Manager Board Requirements: Executive vs. Non-Executive Directors
In MAS, the role of executive directors is given particular importance in fund management companies. There are some ways that independent and studio directors are not the same.
| Type of Director | Role & Responsibilities |
| Executive Director | Overseeing operational, investment and compliance tasks each day for the FMC. Must have background in managing funds and live in or are a Permanent Resident of Singapore (at least one). |
| Non-Executive Director | Not responsible for tasks on a daily basis; usually performs oversight, often by themselves, for large or retail fund management businesses. While not required by regulations, it may be suggested to improve how the firm is run. |
Both types are assessed by MAS for their performance, ethics, skills and financial standing using the Fit and Proper Guidelines.
MAS Director Qualifications Under the Fit and Proper Criteria
MAS suggests that directors meet a spectrum of qualifications which all include demonstrating:
- Appropriate Work Background – Minimum 5 years of working experience in asset management, portfolio management, risk management or related financial jobs.
- Sound Knowledge – Possessing knowledge of how capital markets work, what regulations under the SFA require and what fund management handles for risk and compliance.
- There is no previous history of conduct problems, rule violations or crimes.
Applications can be refused if the candidates do not pass MAS’s tough assessment, regardless of whether you meet the minimum directors.
Best Practices for Fund Company Director Count and Composition
Despite the fact that MAS requires two directors for every company, many large fund management companies go even further by choosing to set stronger governance rules.
- Hiring independent board members to add different opinions and help avoid possible conflict of interest.
- It is important for a business to have a mix of experts in investment, legal, compliance and operations.
- Split the roles of directors carefully if one happens to be the CEO or CIO as well.
- Reviewing and updating the board with recent changes in the regulations.
You do not have to follow them, but doing so will show MAS and investors that you actively work on governance which is helpful for your overall reputation.
Legal Obligations Beyond MAS: Companies Act Compliance
Statutory Rules Under the Companies Act
Together with following MAS requirements such companies in Singapore are obligated to follow the Companies Act 1967, including its requirement to provide an auditor’s report.
- A firm set up in Singapore must always have a local director.
- Anyone wishing to direct must be over the age of 18 and not subject to the Act’s disqualification criteria.
Corporate Governance for Retail LFMCs
Retail LFMCs handling public funds, mainly, may need to comply with Corporate Governance Guidelines that MAS recommends.
- Audit committees were established.
- More accurate information that is easy to see
- Having compliance and risk officers in your company
Case Scenarios: How Many Directors Needed Fund Management?
Scenario 1: A/I LFMC Setup
A new firm intends to handle institutional client portfolios from Singapore. At least two executive directors should be appointed by the company, with at least one living in Singapore, according to MAS. They should be well versed in true portfolio management.
Scenario 2: RFMC with One Director
This applicant suggests that there should be only one executive director in the RFMC structure. It is probable that MAS will decline the application, as there are only one parent director and one child director, instead of the required two directors—one executive should live in Singapore—to be accepted.
Scenario 3: Retail LFMC With Weak Board Structure
When a retail LFMC look after mutual funds for the public, it may come under more watchful eyes. MAS will probably expect the board to include independent and non-executive directors when the executive team hasn’t worked in retail funds.
What Happens If You Don’t Meet Fund Management Company Director Requirements?
A business that does not keep the minimum number of directors may face serious penalties from the authorities.
- A refused or delayed decision on your application during the licensing process.
- License suspension or revocation applied if the number of directors is less than the required amount after receiving the license.
- There are consequences for not sharing true information or presenting misleading MAS.
That is why fund management companies should keep track of board compliance, even when a director leaves or moves abroad.
Conclusion
It is a mandatory rule for qualifying fund management companies in Singapore to have two directors, including executive directors with fund management experience and a director resident in Singapore. The mandate supports MAS’s promise to maintain strong governance, accurate operations and keep investors well-protected.
Though minimal guidelines exist, businesses are welcome to have board members that form a strong and diverse team for ongoing success and future challenges.
Key Takeaways:
- The minimum requirement for directors in LFMCs and RFMCs is two.
- An executive director must live in Singapore.
- Before getting appointed, directors must fulfill the MAS Fit and Proper Criteria on experience and integrity.
- When handling retail investors or a large amount of clients’ assets (AUM), companies should use best practices in governance.
- A failure to meet all director requirements may result in your license being rejected, suspended or dealt with by regulatory agencies.
If you are preparing a CMS license application or want to expand, focusing on completing the required directorship tasks is very important.
