Are Fund Management Licenses Exempt in Singapore?
Financial matters are reliable and secure in Singapore because of the country’s strict and respected rules. Most of the regulation for capital markets and fund management in Singapore is managed by the Monetary Authority of Singapore (MAS). According to the SFA, any firm that wants to manage funds must first get a license from the Capital Markets Services (CMS).
At the same time, MAS thinks that risk and important effects from fund-related activities can vary. Because of that, there are certain fund managers who do not need to follow these standards.
The article examines the cases in which a person or company is not required to obtain a fund management license in Singapore, together with what they are allowed to do, the limits they must follow and the rules they should comply with.
What Requires a Fund Management License in Singapore?
First, you should learn what the SFA defines as fund management before looking into the exemptions. MAS indicates that fund management refers to handling either equities, bonds or units in a collective investment scheme for someone other than the fund manager.
Most people who engage in this activity as businesses in Singapore should be:
- Get a license from CMS to manage your customers’ assets.
- Get registered with the Central Bank as an RFMC.
If you do not have the necessary license or registration, you might face fines or end up going to prison.
Key Exemptions from Fund Management License Requirements in Singapore
MAS has several clearly outlined exemptions that must be met. Certain entities can bypass CMS licensing if they satisfy the requirements and comply with any MAS directives set for them.
Let’s explore each exemption in detail.
1. Single Family Office (SFO) Exemption for Fund Management
Many people recognize Single Family Offices as among the businesses that do not need a license. An SFO works only with the assets of a single family and does not make its services available to clients who are not relatives.
Conditions for Exemption:
- Manages the wealth and assets owned by one family (related by blood, marriage, adoption or the like)
- It does not request or manage funds from anyone apart from its own members.
- It is a setup strictly for the family, intended only for their gain.
- Family members can be the legal owners or beneficial owners of assets.
Even if SFO exemptions are not immediate, MAS wants them to either apply or confirm their eligibility, mainly if the structure is complex.
Compliance Expectations:
- Observing anti-money laundering (AML) and countering the financing of terrorism (CFT) is mandatory.
- Adopt effective management systems and procedures.
- Could be asked by MAS to explain its business practices.
Managers of family wealth at SFOs do not usually require a CMS license.
2. Related Corporations Exemption (Intra-Group Fund Management)
A license is not required for a company that handles funds solely for its affiliated corporations. The concept is also used for intra-group management of funds.
Conditions for Exemption:
- Fund management can only be done within the corporate group.
- The entity does not oversee or invest other people’s money.
- Marketers of fund services do not offer them to the public or advertise them to outsiders.
This allows multinational corporations (MNCs) with a central treasury or investment arm to manage their collective funds without raising an eyebrow.
Important Notes:
- The entity might have to follow other regulations set by MAS, even though it is not defined under the exemption.
- When external capital is included in the firm’s setup, the business may need to obtain a license.
3. Trustee, Custodian, & Nominee: Fund Management Exemption
Trustees, custodians or nominees who do not select the investments can also be excluded from regulation.
Key Criteria:
- It does not use its judgment to manage the investments.
- It is responsible only for protecting funds, conducting trades after client authorization or storing securities.
- Decisions about investments are made by the client or by a licensed fund manager.
For such organizations, being involved in fund management is not considered sufficient to obtain a CMS license.
4. Ancillary Fund Management Activities for Licensed FIs
Some entities that have a main licence from MAS can be exempt if their fund management work is just incidental to what they do.
For example:
- If a bank with a Banking Act license feels that investment advisory or portfolio management for private clients is mainly an ancillary task, then giving these services would not require a CMS license.
- Under a regulated insurance product, an insurance company is not required to have a CMS license for managing its policyholder assets.
Nonetheless, when the management of funds becomes a major business, Malaysian firms must obtain licensing from MAS
5. Government & Statutory Bodies: Fund Management Exemptions
The MAS does not require statutory boards or government agencies to be licensed if they manage public funds.
Examples:
- Temasek Holdings
- GIC Private Limited
- Additionally, some entities are regulated and formed under particular acts of law.
They run under different laws and do not require a regular CMS license.
6. Incidental Fund Management Activities & MAS Exemptions
At times, MAS sees some tasks that fall under fund management as merely part of a different main business and not needing a license.
For example:
- Providing advice on the structure of deals and handling escrow accounts for only one occasion might exempt this adviser.
- Investing funds which a real estate developer uses for a particular project for a short period does not always make them a fund manager.
The decision is based on facts and MAS typically reviews every arrangement one at a time.
Seeking MAS Exemption or Clarification for Fund Management
If an entity feels it is exempt from taxes, it can take steps to claim an exemption.
- Write a letter to MAS or talk to them about your issue.
- Submit business plans, organizational charts and information about your clients.
- Keep in mind that the regulation must allow for the activity and not affect the stability of the market or harm investors.
While MAS may release a no-action letter or confirm its decision informally, this outcome cannot be guaranteed. You should consult legal or compliance experts when looking for confirmation.
Risks of Misusing Fund Management License Exemptions in Singapore
Even if MAS grants exceptions, committing fraud by oversight or building systems to bypass the law can result in the following:
- Imposing fines and warning the public about the issue
- Those who break the law may be fined up to SGD 250,000 and jailed for up to 7 years.
- Having one’s business on the list that restricts future business opportunities in Singapore
Applicable entities need to be communicative with MAS and make sure that using exemptions remains proper and not done just to save money.
RFMC Registration: An Alternative to Fund Management Licensing?
If you do not meet the requirements for full exemption but hope to deal with funds on a reduced scale, you could register as an RFMC.
Recognized fund managers must adhere to lightened rules compared to licensed counterparts, even so, they need:
- Gaining clearance and obtaining documents from the Monetary Authority of Singapore
- Regularly maintaining and reporting.
- There is a limit of 30 investors and another on AUM of up to SGD 250 million.
Having RFMC status allows new fund managers or family offices to prepare for further growth in the future.
Final Thoughts on Fund Management License Exemptions
Although fund management in Singapore is governed by tough rules, MAS has included several clear exemptions to provide more freedom. They are intended to show that some fund management does not present as much risk as others and that certain arrangements within a company are best handled by non-regulated testing.
Still, these changes do not apply to all exemptions:
- Blanket agreements should not be given.
- Be sure to analyze your business model thoroughly.
Many times, they include requirements and ongoing responsibilities
