CMS license as an Accredited/Institutional Licensed Fund Management Companies (“A/I LFMCs”)
An organization that wishes to engage in the regulated operations of the fund management as a Licensed FMC (“LFMC”) or even as a Registered FMC (“RFMC”) must meet specific criteria. A LFMC could be further broken down into Retail LFMC (which allows it to conduct fund management business for all categories of investors) and A/I LFMC (which will enable it to conduct fund management business with only accredited/institutional investors, with no limit on the size of investors).
Managers of venture capital funds could be eligible for a streamlined regulatory framework and a CMS fund management license (VCFM Regime). A RFMC is permitted to administer funds for a maximum of 30 interested investors (not over 15 of whom must be funds), as long as the cumulative amount of the assets under control does not surpass S$250 million. After measuring the assets under administration, the leverage used to manage the funds can be ignored.
Base Capital
A RFMC or even an A/I LFMC must have a base capital of at least S$250,000. An appropriate buffer ought to be in place to guarantee that the base capital would not dip below the minimum requirement.
Staffing
At least two related practitioners and two representatives must reside in Singapore for an RFMC and A/I LFMC. Persons with a minimum of five years of work experience in the supervised activity of fund management, based on the form of funds to be handled, are considered relevant practitioners. Representatives are primarily front-office workers with fewer than five years of specific experience. The entity may therefore have at least two directors with a combined background of at least five years. Two senior professionals with adequate expertise and experience will serve as appropriate professionals, representatives, as well as directors if they are the same two people.
Physical Office
The RFMC or A/I LFMC must have a physical office situated in Singapore to operate. If the organization wishes to use a serviced office at the beginning, the office should be separated from the offices of the other serviced office users, as well as the RFMC or A/I LFMC’s information and documentation, should be stored in a safe location.
Audit functions, Custodian and Administrator
A RFMC or A/I LFMC must select an impartial auditor with appropriate expertise in FMC auditing. An internal audit mechanism is often developed to ensure that proper checks are in effect. The custodian as well as administrator that the FMC appoints must be respectable organizations.
Professional Indemnity Insurance
Although professional indemnity insurance is not required for RFMCs or A/I LFMCs, many do so due to excellent practice and to provide comfort to their investors. The existence of technical indemnity insurance arrangements, or the lack thereof, must be disclosed to investors.
Compliance and Risk Management
It will be ideal if the RFMC or A/I LFMC should hire dedicated compliance personnel to handle both compliances as well as anti-money laundering provisions. However, if a compliance officer who is full time is not available in the early stages, the Chief Operations Officer (COO) or even a senior employee who is not part of the front office will fill in, and an impartial compliance specialist can be hired to do routine reviews and include a briefing on the FMC’s compliance concerns. An A/I LFMC with more than S$1 billion in assets under control is required to have a compliance officer who is independent and other appropriately qualified personnel to handle back-office functions.
