What Are the Different Types of Fund Management Licenses Available Under MAS?
Many places in Asia and the wider world, Singapore is well-regarded for being an equitable and reliable financial center. One of the main reasons for Singapore’s reputation is the regulatory role carried out by the Monetary Authority of Singapore (MAS). If you are running an FMC in Singapore, you need to be licensed by MAS if your business is certain types, or simply register if it is not.
No matter what type of firm you have and which investors you aim to service, knowing the various fund management licenses available from MAS is very important for doing business in Singapore effectively and within the law.
Introduction to Fund Management Regulation in Singapore
Fund management in Singapore is controlled by the Securities and Futures Act (SFA). To work professionally with financial assets, it is necessary for anyone to apply to MAS for a license or a registration, unless there are special exemptions. It has been set up to look after investors, maintain the honesty of the market, and ensure that financial services are open about their activities.
MAS provides three main licensing categories for fund managers:
- Licensed Fund Management Company (LFMC)
- Venture Capital Fund Manager (VCFM)
Some firms may be considered an Exempt Fund Manager (EFM) in suitable cases. All licenses and exemptions have their own set of rules and expectations, plus certain limits.
Licensed Fund Management Company (LFMC)
Fund managers interested in growing and serving a larger number of clients can apply for an LFMC license through MAS. The license is broken down into two main groups depending on the kinds of clients the firm can manage:
1. Accredited / Institutional Licensed Fund Management Company (A/I LFMC)
This category is meant for fund managers that manage money for qualified institutional and accredited investors only. Thanks to no limits on AUM or the number of investors, A/I LFMCs can operate more widely and can reach more customers.
Every A/I LFMC has to have at least SGD 250,000 in base capital, but this might increase based on how big the business is and how much risk it faces. Management companies are required to find and hire staff who have worked in fund management and ensure they have firm systems for dealing with operations, compliance, and risks. All financial institutions are expected to provide financial statements and compliance forms to MAS on a regular basis.
This registration appeals most to fund managers in the hedge fund, private equity, or family office sectors, given their more formal set-ups.
2. Retail Licensed Fund Management Company (Retail LFMC) for Public Investors
Retail LFMCs have the permission to oversee money for investors, who may include people from the public. Since retail investors are thought to be less knowledgeable about finance, MAS sets higher standards for fund managers working with them.
A retail LFMC is required to have starting capital of SGD 1 million and may need more if its work increases in complexity and size. On top of this, they have to create in-depth compliance procedures, offer truthful disclosures, and make sure shareholders are sufficiently protected.
Unit trusts or mutual funds as collective investment schemes can be made available by retail LFMCs. They are a valuable option for fund managers wanting to create investment products for the public and look after the funds of various investors.
Venture Capital Fund Manager (VCFM) License
The Venture Capital Fund Manager (VCFM) regime was introduced by MAS in 2017 to foster innovation and entrepreneurship in Singapore. This type of license is created especially for fund managers who exclusively manage VC investments.
VCFMs may use funds to invest in small or growing companies that are not yet listed. The funds must function as closed-end funds, meaning they cannot let investors take their money out for at least five years, and also cannot promise a guaranteed payout. The purpose of this rule is to make sure the license is applied only to real venture capital activities.
The process of getting a VCFM license is faster and more straightforward than for regular vessels. There are no requirements for capital or risk-based auditing. At least two directors should have prior experience, and the company should put in place key risk management steps.
The licensing process works well for fund managers interested in start-ups, technology firms, or startups in their growth stage, especially in Asia.
Exempt Fund Managers (EFM) Status Under MAS
In very limited situations, MAS lets specific entities operate as fund managers without registration or a license. They are called Exempt Fund Managers (EFMs).
EFM status may apply to:
- Funds will be used by companies that are owned by the related corporation.
- These offices are set up to look after the wealth of one family alone.
- The activities of these entities are limited to not for profit funds.
EFMs are not under any licensing rules but do need to meet regulatory requirements such as AML and CFT. They must also plan to apply for a license if the business activities need to go beyond what is allowed by the exemption.
EFMs allow organisations to choose how they want to use their funds or closely track them up to a certain standard, but MAS still ensures they follow wider financial laws.
How to Choose the Right Fund Management License Under MAS
Picking the right licensing option for fund management from MAS involves several planning and running-the-business aspects.
Type of Clients
The choices you have for investors will help determine your company’s regulator and licensing requirements. There needs to be especially close attention placed on retail operations.
Business Scale and AUM
A small client base and an AUM in line with your competitor’s may not require much more than an RFMC. But if you want to grow at a fast rate, choosing an A/I LFMC or a VCFM may be a better option for your investment needs.
Fund Strategy
Your choice of hedge funds, private equity, real estate, or venture capital will play a role in determining your eligibility and what regulations apply to you. For example, VCFM could be simpler if all your assets are invested only in venture capital.
Operational Readiness
Those looking to get a license under MAS are required to have effective internal controls, governance, risk frameworks, and compliance systems. Technical competence should be easy to prove for companies when they apply, and also throughout their engagement with the program.
Conclusion
The fund management industry in Singapore is on the rise thanks to detailed and straightforward licensing laws monitored by the Monetary Authority of Singapore. No matter if you’re just starting out or expanding into Asia, it is important to be familiar with the available fund management licenses to make your business model follow the regulations.
RFMC, A/I LFMC, Retail LFMC, VCFM, and EFM are each used for different parts of the market that need them. Which one you pick should be determined by who your clients are, the size of your operations, and how you want to use your funds. By choosing the proper license and following MAS’s regulations, fund managers can achieve sustainable development in Singapore.
