How Fund Managers Apply for a CMS License in Singapore

Fund managers value Singapore’s position in Asia as a reliable and predictable business destination with steady regulations. When managing funds in Singapore, a fund manager is generally required to get a Capital Markets Services (CMS) license from the Monetary Authority of Singapore (MAS), as set out by the Securities and Futures Act (SFA).

Before being granted a CMS license, a company must adhere to regulatory, functional and governance criteria to guarantee investors are protected and the financial market remains intact. This article covers every step that fund managers should follow to apply for a CMS license for fund management in Singapore.

1. Overview of Fund Management Licensing in Singapore

You should find out which organizations may qualify and the types of licenses before you apply for a CMS license.

1.1 Types of Fund Management Entities (Fund Manager License Singapore)

Generally, fund managers are assigned to one of the listed categories.

• LFMCs: Take care of funds invested by accredited investors and by those considered retail investors.
• RFMCs: Work with up to 30 endorsed investors and manage their funds if the assets they hold are worth less than S$250 million.
• Some entities such as single family offices and related corporations, may be exempted from having to get a license as a fund manager.

The article is about companies with an EFCM license that are seeking a CMS license.

1.2 Types of Investors in CMS License Requirements Singapore

The next section looks into the different kinds of investors. The choice of your CMS license can be made according to who your private fund seeks to serve.

• A/I LFMC: Lower set of rules compared to A..
• Retail Investors (Retail LFMC): More rules and regulations are required since these investors require extra protection.

2. Pre-Application Considerations for CMS License Application in Singapore

2.1 Define Your Fund Manager Business Model in Singapore

An applicant is required to have a clear definition of their field before turning in their application.

• How to invest and what you can choose to invest in
• Determine if your investors will be retail or accredited/institutional.
• Geographic coverage
• The manner in which the business is governed and owned
• Offer investments in various products or frameworks such as unit trusts and segregated mandate

2.2 MAS Compliance Requirements for Fund Managers

MAS reviews the applicant’s robustness.

• A collection of compliance measures (which includes AML/CFT policies)
• Internal controls
• The system in place to deal with risks
• Governance structure

Applicants should make a compliance manual that fully follows the MAS policies

2.3 Key Personnel Requirements for CMS License

Since it is mandatory by CMS, the applicant must appoint:

• An Executive Director or CEO with fund management skills
• At least two representatives based in Singapore, both with a minimum of 5 years of experience related to the field
• Those who do not have issues with rules and regulations

MAS ensures that important individuals involved in the industry are fit and appropriate.

3. Step-by-Step CMS License Application Process in Singapore

Step 1: Prepare the Required Documents for MAS Application

These are the objects and tools that you should have ready:

• Business plan
• Organizational chart
• Concise descriptions of everyone sent to represent the company
• A method for handling and tracking compliance and risks
• Investigate the track records of the parent company or any associated companies (if they exist).
• The direct and indirect holders of shares

Updating all documents in an accurate manner will prevent delays.

Step 2: Submit CMS License Application via MAS Portal

All applications are sent through the MAS Corporate e-Lodgement system (CeL).

• The professional must pick between the Fund Management and Retail licenses for A/I.
• Form filling on the web
• Provide necessary paperwork.
• Payment of the application fee (which is S$1,000 to S$5,000 according to the total amount required)

Those offering any advisory services must also attest that they are following the Financial Advisers Act (FAA).

Step 3: MAS Review Process for Fund Management License

After the M.A.S. is received, MAS will:

• Make sure to confirm that you have received the application.
• Examine the directors, shareholders and representatives of the company.
• Consider the rules for governance as well as how internal controls, risk management and operations are handled by the organization
• Get further details or documentation whenever it’s appropriate

MAS will analyze whether the business model could lead to any problems for the company or its reputation.

Step 4: MAS Approval or Rejection

When everything is approved by MAS, you will receive a license showing your CMS status.

• Activities that are approved by the SFC (fund management).
• Retail or Accredited/Institutional investors are the types served by the fund company.
• Essential rules (such as having certain amounts of capital, prepared compliance reports)

If the account is not approved, the MAS will supply the reasons and the applicant may try again when these issues are fixed.

4. Post-Licensing MAS Obligations for Fund Managers

Receiving approval for the CMS license is only the first step. Fund managers are always required to follow the MAS regulations.

4.1 MAS Capital Requirements for Fund Management Companies

Base capital depends on the requirements of each country.

• A total of S$250,000 is given to A/I LFMCs each year.
• Retail LFMCs are granted a minimum of S$500,000.

Besides, managers have to hold assets that are higher than the risk-adjusted capital standards require.

4.2 MAS Compliance Framework for CMS License Holders

Fund managers have to use:

• Excellent internal controls
• Procedures and rules for handling AML/CFT.
• Procedures for dealing with people in your staff
• Regular checks and audits

MAS requires that the compliance officer is either an employee of the company or hired by an outsourced organization.

4.3 MAS Reporting Obligations for CMS Licensees

Those with a CMS license are required to hand in:

• Each year, financial statements need to be created.
• Form 1, 1A and 3 are examples of regulatory returns needed for banks.
• During this time, compliance reports are created and submitted.
• Changes in people or ownership affecting the company

Regulators require companies to report promptly and with accurate data.

4.4 Risk and Governance Management in CMS Licensing

Fund managers have specific tasks they must handle.

• Assess the risks regularly.
• Be sure to vigilantly supervise how things are carried out
• Make sure that governance and risk management systems operated by the Board are set up.

A failure to observe these standards may lead to MAS taking action against a financial institution or revoking its license.

5. Tips for a Successful CMS License Application

• Consult with a compliance or legal expert in the beginning of the process
• Confirm if the main decision-makers of banks and financial institutions meet the MAS’ background and character guidelines.
• Maintain precise documentation, mostly regarding compliance and risk control.
• Present information openly to MAS and supply responses as quickly as you can.
• Be aware that it may take several months or even longer for MAS to handle the application.

Properly prepared and approved applications are more likely to be accepted.

6. Common Reasons MAS Rejects CMS License Applications

The Medical Assistance Services or MAS, could decline an application for a CMS license in some instances.

• Not enough experience of those managing the firm
• Not having a business plan that others believe in
• Feeling unable to follow or use compliance or risk frameworks
• Difficult-to-follow patterns of ownership
• Not having enough money

Managers should deal with these issues early on during the process.

7. Alternative Option: RFMC Registration with MAS

If you are just starting out and do not have much capital, you may want to apply as an RFMC. Even without a license, RFMCs have to adhere to different requirements.

• Be registered with the Monetary Authority of Singapore
• Only allow up to 30 investors who are approved by the FCA to invest.
• Keep the funds managed by you below S$250 million.
• Comply with all current expectations related to compliance and reporting.

RFMCs show firms that they can grow and evolve towards becoming LFMCs.

Final Thoughts: CMS License for Fund Management in Singapore

To obtain a CMS license for fund management in Singapore, candidates have to go through a comprehensive and thorough evaluation. It might look challenging, but if you prepare well, follow top governance and communicate openly with MAS, the process will be much easier.

The licensing process for fund managers in Singapore must be taken seriously as it ensures that the business is seen as reliable, sustainable and set for long-term achievement. If you fulfill all MAS rules from the outset, you establish trust and respect in the financial industry of Singapore.