Case Study: LFMC Retail Licence Advisory Supporting Regulatory Readiness in Singapore

Background on Case Study LFMC Retail Licence

One of the financial services companies was intending to diversify its business model to encompass regulated operations of managing capital of retail investors in Singapore. As an element of its strategic development strategy, the company realized the necessity to acquire Licensed Fund Management Company (LFMC) – Retail licence granted by the Monetary Authority of Singapore (MAS).

Although the company boasted of good investment experience and established track record of operation in Singapore, it lacked previous experience in navigating through the Singapore regulatory licensing process. The management realised that to apply in an LFMC Retail licence means not only complying with minimum capital requirements but also exhibiting effective governance, advance risk management policies, compliance policies and operational preparedness to meet the expectations of MAS.

To facilitate this process, the firm contracted our LFMC Retail licence services to help it through the licensing process in a structured, compliant and efficient way.

Issues and Challenges

The LFMC Retail Licence application process had a number of hurdles that are usually encountered when firms ventured into the regulated fund management arena in Singapore.

Complexity of regulatory requirements was one of the major threats. The expectations of MAS licensing vary across several aspects such as corporate governance, internal controls, compliance arrangements, risk management, and business continuity plan. It took expert regulatory knowledge to know how these requirements were working in practice, and not theorized.

The other problem was readiness of documentation. Although the firm has internal policies and procedures, most of these have not been designed in a manner that aligns with the MAS regulatory standards. A lot of effort was put in formalising, improving and documenting structures in order to comply with licensing requirements.

Another problem that the firm encountered was the ability to show the organisational substance. MAS also asks applicants to demonstrate that they possess qualified personnel, defined roles and responsibilities, and separation of duties. The application was also important in ensuring that staffing, reporting lines, and oversight structures were well stated.

Lastly, execution risk was a concern to the management. Unfinished or irregular submissions may cause delays, follow up questions or unfavorable regulating consequences. The company required an effective roadmap and professional direction on how to handle the licensing process.

Objectives

The first aim of the engagement was to assist the firm to be successful in applying and acquiring an LFMC Retail Licence in Singapore.

In particular, the firm pursued the following:

• Know the MAS licensing requirement of LFMC Retail applicants.
• Develop governance, compliance and risk management structures in line with regulatory demands.
• Make up thorough and harmonized licensing reports.
• Display functional preparedness and corporate weight.
• Manage the MAS application process effectively and with ease.

The licensing assistance had to be a comprehensive, regulator-oriented and firm-specific business model.

How We Helped

We took a banked and regulator-consistent approach to the advice of LFMC Retail Licence, which was created to aid the quality of the application and future regulatory preparation.

We started by first taking a licensing preparation test. This entailed assessment of the proposed business practices, the organisational structure and the policies in place at the firm to find gaps compared to those needed by MAS LFMC Retail licence.

On this evaluation, we were able to come up with a clear roadmap of licensing, which identifies major work streams, documentation needs, and timelines. This roadmap gave the management a realistic perspective of the licensing process and assisted the management to prioritise on effort.

We assisted the company to formulate and improve important regulatory documents such as compliance manuals, risk management frameworks, internal control policies and governance documentation. These reports were specific to show the actual activities in the firm even though they were in alignment to MAS expectations.

We have also helped in the organisation of organisational and governance structures of the firm. This involved the definition of roles and responsibilities of directors, senior management, compliance and risk functions and recording reporting lines and control mechanisms.

In the application, we also gave advice on how to prepare responses to MAS application forms and supporting documents. Consistency, clarity and transparency were highlighted to make sure submissions were correct in the capabilities and preparedness of the firm.

During the engagement, we collaborated extensively with the management to make the regulatory expectations practical in terms of making informed decisions and minimizing uncertainty. We were not only to be supportive to the application but also to assist in inculcating regulatory thinking within operations of the firm.

Value Delivered

Such interaction demonstrates that professional LFMC Retail licence advisory services can be used to assist companies that intend to carry out their business in a highly regulated financial services environment in Singapore.

Our services assisted the management to have a clear thinking with respect to the regulatory expectations and enhanced internal governance and controls by assisting the firm in a structured and compliant way through the licensing process. The overall operational and compliance framework of the firm was also enhanced during the licensing preparation process, which has long-term advantages which outweigh the application itself.

The designed LFMC Retail Licence framework developed as a result of this engagement put the firm in a position to conduct its business with more confidence, regulatory sensitivity and operational discipline as it broadened its regulated operations in Singapore.