Multiple CMS Licences for Fund Managers

It is commonly known that Singapore has one of Asia’s largest financial centers, providing fund managers a secure environment, up-to-date structures and connections to the world’s major capital markets. Regarding offering financial services, fund managers must keep in mind the rules laid out by the Monetary Authority of Singapore (MAS).

Many fund managers often ask: “Is it possible for a fund manager to operate with more than one Capital Markets Services (CMS) license?” Yes, you can invest in cryptocurrencies under the rules and with permission of the MAS. Still, the solution gets more detailed when looking at the type of actions, investors involved and how the organization operates.

This paper looks into the rules for CMS licensing, examines the types of available licenses and identifies whether a fund manager is allowed to hold multiple licenses under the Securities and Futures Act (SFA). For expert guidance, fund managers often work with Capital markets licensing consultants Singapore to ensure full compliance with MAS regulations.

CMS Licences in Singapore’s Capital Markets Services Framework for Fund Managers

What Is a CMS License?

Under the SFA, a Capital Markets Services (CMS) license from the MAS allows a company to engage in certain regulated activities. Here, we will take a look at activities that need to be regulated:

• Fund Management
• Trading Capital Markets Products
• Helping with Choices on Investment Opportunities
• Product Financing
• Offering Services to Look After Securities
• Managing Real Estate Investment Trust (REIT)
• Trading with borrowed money in the foreign exchange market

Fund managers must get a CMS license to manage the investments of their clients by handling their asset or security portfolios.

Can a Fund Manager Hold Multiple CMS Licenses?

Multi-Activity CMS Licences for Fund Managers Are Permitted

In Singapore, a company can obtain one CMS license to cover all its regulated business areas. A manager of a fund might, for example, apply for a CMS license to allow them to handle both:

• Management of Funds.
• Providing information on different types of investments

It is called multi-activity licensing and many fund managers opt for it when they want to provide various financial services within the same organization.

Separate CMS Licences vs. Multi-Activity Licensing for Fund Managers

A licensed fund manager may handle many activities, but MAS usually only issues one CMS license detailing what they are allowed to do. That is why the licensee only needs one main CMS license with authorized areas, rather than several separate licenses.

Why Fund Managers Seek Multiple CMS Licences in Capital Markets Services

Greater Flexibility for Fund Managers through CMS Licences

Managers of funds are often interested in including other financial services in their lineup. For example:

• Under Fund Management, we use Discretionary Portfolio Management.
• Under Advising on Investment Products, there are Non-Discretionary Advisory Services.
• Marketing and Distributing Funds (in the section of Working with Capital Markets Products)

Handling various activities that need regulation by the CMS means a single firm can address all its functions, even without making separate companies for each one.

Fund Managers Serving Diverse Clients with CMS Licences

Different kinds of clients might require a firm to obtain a multi-activity license.

• Retail clients
• Accredited investors
• Institutional investors

For example, if someone advises individual clients to invest in particular products, along with the fund management license, they might require an advisory license as well.

Capital Markets Services for Fund Managers Offering Diverse Products

Some firms provide complex products that are different from the usual approaches to managing assets. Sometimes, these instances require other licenses to be secured.

• Transactions involving OTC derivatives
• Looking after the portfolio and assets of managed funds
• Being the trustee for investment funds managed by many people

Considerations Before Applying for Multiple CMS Licences for Fund Managers

Compliance and Operational Readiness in Capital Markets Services

Entities carrying out different regulated activities should ensure they follow these MAS expectations:

• Strong controls within the company
• Separate departments handling compliance and risk.
• Setting up different jobs so that one person cannot perform both is important.

The framework for governance, staff competence and systems should support all the activities in ethics.

Financial Requirements for Fund Managers Seeking Multiple CMS Licences

When a company does several regulated activities, it may have to keep more capital and financial resources. For example:

• A company involved in managing funds for retail investors needs a capital base of at least S$500,000.
• Offering these services could lead to greater capital requirements for firms.

MAS makes sure that the firm’s finances are sound enough to manage all the associated risks from its wider operations.

Fit and Proper Criteria for CMS Licence Holders

People responsible for each regulated activity should comply with the MAS’ fit and proper standards.

• Professional qualifications
• Relevant experience
• History of observing responsibilities and principles

The company may have to assign representative people with expertise in every new area that it regulates.

Enhanced Supervisory Expectations

Those with multifunctional CMS licenses are closely observed by regulators.

• More rules and regulations need to be followed.
• Increased requirements for reporting.
• MAS reserves the right to conduct on-site inspections once in a while.

For this reason, the firm should keep its records clear and separate accounts for its different activities.

How to Apply for Multiple CMS Activities

Single Application Process

A fund manager can apply for various CMS activities using just one application submitted through the CeL system. When applying, you have to state:

• All things the company is required to regulate
• A business plan is required for every activity being planned.
• Qualifications and history of the people chosen to guide the company

MAS Assessment Process

MAS will analyze the application based on:

• The model is logical and clear.
• Policies and plans for risk management
• Quality of the internal control system
• Leaders and important people should be effective.

During the review, MAS could talk to directors, ask for more papers or examine subsidiaries.

Alternatives to Multi-Activity Licensing

Sometimes, fund managers see using alternatives such as:

Setting Up a Separate Entity

Instead of trying to do all the company’s activities with only one license, a firm could decide to:

• Organize companies so that each has its own license for specific tasks.
• Take advantage of the measures that restrict activities between banks and insurance companies.

It helps protect a company’s reputation in case compliance problems only impact a particular line of business.

Partnering with a Licensed Service Provider

Fund managers may also choose to work with companies that hold valid licensing for the needed CMS systems.

• Distributors
• Trustees
• Advisory firms

With less need for government licenses, the firm’s grasp on how services are delivered decreases.

Ongoing Compliance for Multi-Activity CMS Licensees

Upon receiving a license, the fund manager needs to:

• Make sure all departments follow ALL the guidelines set by the SFA and FAA
• Keep up with your regular filings (that is, Form 1A and Form 3).
• Report to MAS if there are major updates in your company’s way of conducting business.
• Perform an audit every year and make certain to have enough compliance experts—preferably those who have completed a certified compliance training program Singapore offers to ensure up-to-date regulatory knowledge.

MAS believes that licensed persons ought to maintain good behavior, mainly when working with retail customers.

Final Thoughts

To sum up, it is possible for a fund manager to hold several types of CMS licenses or to carry out multiple CMS-regulated activities using one license. Because managers can adapt, they are able to provide new services, more effectively serve different groups of clients and respond to new market demands.

However, obtaining and maintaining a license for a multi-activity CMS takes a lot of careful work, dedication and imposed rules. When planning how to obtain a license, fund managers ought to consider their existing knowledge and reach out to experts for assistance.

Taking on several authorized CMS activities by using a single license may benefit long-term focused fund managers in Singapore’s financial services industry, if the necessary infrastructure and management is present.