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The fit-and-proper standards that Singapore’s fund managers must meet are among the most basic aspects of the MAS’s regulatory framework for the asset management industry. These requirements are defined in the MAS Guidelines on Fit and Proper Criteria (FSG-G01) and implemented in the licensing conditions for all Capital Markets Services (CMS) licensees. They are thus the minimum standards that should be observed at the time of licensing and throughout a licensee’s lifetime by directors, chief executive officers, appointed representatives and other key personnel of fund management companies. The fit and proper framework is not a background compliance requirement; it is a gatekeeper that allows MAS to identify and approve applicants seeking to exercise a management role over third-party funds in Singapore’s regulated financial markets.
The four assessment areas are: honesty, integrity and reputation; competence and capability; financial soundness; and other factors, including conflicts of interest and time spent on Singapore operations, and are not broken down into individual criteria. There is no one-off disqualifier, and MAS believes that a person’s personality, professionalism, and competence should be judged as a whole. It is a nuanced understanding of the MAS fit and proper criteria that is crucial for any fund management firm in the making of a Singapore licence application, for existing Singapore-licensed fund managers, and for investment professionals who wish to know the level of standards that they will be expected to meet in Singapore’s institutional asset management community.
The concept of ‘fit and proper’ is applied directly to fund managers in line with MAS’s investor protection mandate. They have a high level of trust and responsibility placed on them, as they have discretionary control over the investment portfolios of clients who have entrusted them with their money, whether those clients are institutional investors, family offices, or high-net-worth individuals with large amounts invested. The integrity of Singapore’s fund management ecosystem is thus as much a matter of regulatory obligation as it is of commercial due diligence for investors, and of the integrity of the people who manage these assets. A fit and proper fund manager is essential to the welfare of investors and, thus, to achieving MAS’s vision of Singapore as a well-regulated and respected international financial centre.
In addition to investor protection, the MAS suitability assessment guide framework’s overall systemic role is to ensure that Singapore’s fund management industry is populated by firms with a person in charge who has real professional standing and personal integrity. MAS’s stringent enforcement of fit-and-proper standards is a key factor in the Singapore fund management community’s reputation and appeal to institutional capital sources across the globe. MAS’s licensing and fit-and-proper regime is a positive validation of the governance practices of fund managers licensed in Singapore, in the eyes of regulators and institutional investors in other jurisdictions. This external validation forms a virtuous cycle: a high standard will attract high-quality managers, enhancing Singapore’s reputation and bringing in more high schoolers with quality players.
MAS’s fit and proper assessment standards are derived from the MAS Guidelines on Fit and Proper Criteria (FSG-G01), first published in 2005 and subsequently revised to reflect changes in regulatory expectations and best practices. These guidelines are relevant to all MAS-regulated institutions, including fund management companies. Still, they are especially relevant to fund management in CMS licensees because of the nature of their discretionary investment management role. The guidelines are also supported by the terms of admission for each type of licence and by guidance on the application process set out in the respective conditions of admission for Licensed Fund Management Companies and Venture Capital Fund Managers issued by MAS.
The four main assessment areas identified in the guidelines are: Honesty, integrity and reputation; Competence and capability; Financial soundness; Other relevant considerations. It is clear from the guidelines that it is the responsibility of the person or institution being assessed to demonstrate that they are not fit and proper, not MAS’s to prove their unfitness, and MAS will only be willing to prove fitness if the applicant demonstrates that they are fit and proper to MAS’s satisfaction. The usual evidential burden shifts emphasis to MAS’s approach to the gateway role of fit-and-proper assessment and on the trust that investors have in fund managers licensed by MAS.
The MAS fit-and-proper assessment process aims to achieve several interdependent goals that cover various aspects of MAS’s regulatory and supervisory functions.
The assessment process directly safeguards the interests of investors who have entrusted their money to MAS-licensed fund management companies by ensuring that only those who are honest, competent and financially sound have the authority to make investment decisions on their behalf. The assessment serves as an early “red flag” filter, helping to prevent that sort of harm to investors caused by the activities of unsuitable persons.
The integrity of Singapore’s capital markets is enhanced by the collective fitness of the people who work in Singapore’s fund management industry. Such orderly, transparent and fair market integrity objectives are underscored by the fact that fund managers whose key personnel meet the fit and proper requirements established by MAS are more likely to behave in ways that facilitate orderly, transparent and fair market functioning.
MAS’s assessment process is designed to deter regulatory arbitrage by individuals who wish to set up operations in Singapore following adverse regulatory action by their regulators in other countries, by applying consistent and rigorous fit-and-proper standards to all applicants. MAS regularly conducts cross-border background checks and maintains information-sharing arrangements with foreign regulators.
MAS’s high standards for fit and proper also set an important precedent for the international investment community that the governance practices of fund managers licensed in Singapore are subject to the scrutiny of an honest and internationally respected regulator. This is a useful signal for fund managers in Singapore when they are marketing to institutional investors, and may be to investors who have their own formal code of best practice that regulates fund management counterparties.
The fit and proper framework applies to a specific category of individuals and entities for each CMS licence application and for the maintenance of continuing licences. Defining exactly who needs to be assessed, and when, is an essential part of the Singapore fund manager licensing requirements compliance process.
The corporate applying for the CMS licence itself has to undergo a fitness test: the proposed shareholding structure, the identity and fitness of the key shareholders, the proposed capital and the credibility of the business plan. There will be increased focus on entities with opaque ownership structures, on UBOs that are not satisfactorily identifiable, and on proposed shareholders with adverse regulatory histories.
All proposed directors — including non-executive directors — of the fund management company are subject to individual fit-and-proper assessments. The officers bearing the designation of ‘Executive directors’ who are ordinarily resident in Singapore are held to a higher standard. They are responsible for active participation in the Company’s management. The evaluation includes all aspects of fit and appropriateness, and also focuses on honesty and integrity in light of the fiduciary responsibilities of the director role.
The person most closely involved in the day-to-day operations of the fund management company in Singapore (the CEO or equivalent senior manager) will be assessed and reviewed most thoroughly with respect to professional experience and qualifications, regulatory history, and financial stability. The CEO shall be ordinarily resident in Singapore and have suitable experience and competence for the type of licence applied for.
Every person who will be a representative of the CMS licensee (engaged in regulated activities, e.g., fund management or transacting in capital markets products for the firm) must be assessed individually to meet MAS’s fit and proper requirements. Representatives should have the qualifications and pass the examinations set by MAS for their regulated activities.
The first and most basic dimension of the MAS assessment framework for the fit-and-proper criteria is honesty, integrity, and reputation. MAS’s assessment of an individual’s honesty and integrity is not confined to the scope of whether the individual has a criminal record but also covers a wider range of conduct, such as how he or she has discharged professional duties, the history of candour with MAS and its counterparties, and his or her reputation in the financial services industry. This approach is holistic, in keeping with MAS’s view that regulatory fitness goes beyond formal qualifications and clean records and is as much a matter of character and judgment.
MAS evaluates honesty, integrity and reputation based on the applicant’s personal statements (which include full details of criminal background, regulatory history, civil proceedings and all circumstances that may have an impact on the applicant’s character) and background screening by other independent means, such as regulatory reference checks with overseas counterparts and information provided by other regulatory bodies. Inconsistent regulatory handling of individual fit and proper declarations where the substance of the disclosure would not have been disqualifying, but the non-disclosure is disqualifying, is the sharpest shot in the bow of those who are the least transparent when making their disclosures.
One of the most important factors in MAS’s determination of an individual’s honesty and integrity is any criminal convictions and/or past regulatory proceedings. MAS has a worldwide perspective and evaluates a person’s conduct, regardless of the time or place of the incident.
The individual’s fit and proper declaration must include any criminal conviction, irrespective of when it was recorded, whether a custodial sentence was imposed, and whether it has been spent under the relevant law. The nature and gravity of the offence, sentence received, the time elapsed since the conviction and evidence of subsequent rehabilitation are taken into account in assessing the weight to be given to the criminal history in the overall fitness assessment, in the context of an assessment by MAS.
Dishonesty or fraud, market misconduct, insider trading, theft, or money laundering offences are given serious consideration and will almost always result in the disqualification of the person concerned from a key position in an MAS-licensed fund management company. In the context of fund management (discretionary control over third-party assets), the issue of financial honesty and integrity is particularly pertinent to MAS’s fitness-for-purpose assessment.
This means that all regulatory measures imposed on an individual by a financial regulatory authority in any jurisdiction (such as revocation of licence, suspension, ban, civil monetary penalties, formal warnings, etc.) will be made public and will be considered as a measure of the individual’s compliance culture and regulatory standing by MAS. Regulatory actions in other jurisdictions do not automatically disqualify, but must be explained with credibility and transparency of the circumstances and remediation steps taken.
Members must report any pending criminal, regulatory, or civil proceedings regarding financial misconduct, even if such proceedings have not concluded. MAS can delay making its fit-and-proper determination until the pending proceedings are complete and/or attach conditions to licensing that may be modified depending on the outcome.
For MAS, financial misconduct – personal or corporate – is a serious breach of fitness to manage third-party assets. The link between personal financial responsibility and the fiduciary duties of a fund manager is straightforward: If someone has been irresponsible and unscrupulous in their personal finances, they are more likely to be the same with investors’ money.
Under the Companies Act, an undischarged bankrupt cannot act as a director of a Singapore company. The Companies Act provides an automatic eligibility bar for proposed directors of fund management companies. Discharged bankrupts do not automatically lose their right to continue in the business. Still, they are required to declare their bankruptcy status and the circumstances surrounding the bankruptcy, the time period that has elapsed since discharge and whether the bankrupt has behaved responsibly since the bankruptcy. These factors will be taken into account in determining the continuing fitness of a discharged bankrupt.
If an individual has been in an individual voluntary arrangement (IVA), a debt restructuring programme or another formal debt management arrangement, he or she should inform MAS of such arrangements. A managed approach to financial difficulties may be considered responsible conduct. Still, MAS will consider whether the circumstances that led to the financial difficulties are relevant to the person’s fitness to manage third-party capital.
Directors of a company that was insolvent at administration (liquidation), judicial administration and administration under a scheme of arrangement) They are required to disclose their involvement and circumstances. MAS is especially keen on the question of whether the bankruptcy was avoidable, whether any evidence of wrongdoing exists preceding or during the bankruptcy process, or whether the individual has been disqualified as a director as a result of the bankruptcy.
Misconduct that demonstrates financial dishonesty, even if not the basis for a criminal conviction, and does not involve misappropriation of assets or engage in deceptive practices may be assessed by MAS as relevant to the honesty and integrity criterion. When developing a picture of an individual’s financial conduct history, MAS relies on a variety of sources of information, such as civil court judgments, arbitral awards and regulatory findings.
Reputation is one aspect of fit and properness that is not part of the legal and regulatory record. A person’s general position in the financial services sector is determined by the information they provide on the application, the background check and enquiries made with regulatory and industry peers to MAS.
MAS may consider an individual’s professional reputation in the financial services industry, including their professional relationships, reputation with previous employers, and reputation for fair dealing, transparency, and adherence to regulatory requirements. Candidates who have previously had difficulty handling conflict, complaints, or reputational issues in the industry, either through formal or informal channels, may be scrutinised more closely.
MAS will take adverse media reports and other publicly available information into account when determining a person’s reputation, especially if the information reports or implies conduct relevant to the fit and proper criteria. Applicants must note that MAS conducts media screening as part of its background verification process, and it is advisable for applicants to disclose and explain any adverse media coverage in their fit and proper declarations, rather than it being picked up in their applications.
MAS has established information-exchange mechanisms with other key financial centres, such as the United Kingdom, the United States, Hong Kong, Australia, and the European Union. During the fit and proper assessment of an individual from a foreign jurisdiction, information received from regulatory authorities in the relevant foreign jurisdiction is a recurring regulatory reference, and adverse information received by a regulatory authority from other jurisdictions is considered in relation to the individual’s own disclosures.
Findings by professional bodies, such as securities regulators, stock exchanges, professional accountancy bodies, or bar associations, are relevant to the reputation component of the fit-and-proper assessment. Any history of suspension, disqualification, or censure by a professional body should be disclosed, and the person should be ready to explain it and the rehabilitation process undertaken.
The competence and capability requirements of the MAS compliance standards for directors and fund management professionals include formal education, professional qualifications, and regulatory examinations to demonstrate at least a basic level of technical knowledge. The qualification requirements differ according to role and the type of licence sought, but share the purpose of ensuring that individuals with a decision-making role in regulated areas of investment management are technically knowledgeable and have completed a recognised assessment process to demonstrate this.
MAS does not require a specific set of academic qualifications for all academic positions within the fund management industry. Still, it does set minimum examination requirements for those appointed to carry out regulated activities. Persons applying to become representatives for fund management or capital markets products must pass the appropriate papers in the Capital Markets and Financial Advisory Services (CMFAS) examination programme offered by the Institute of Banking and Finance Singapore (IBF), or satisfy the exemptions for passing the papers available to them based on other qualifications or certifications recognised by MAS. In senior management positions such as CEO and executive director, MAS considers the full extent of a person’s education, professional designation, and continuing professional development, all of which are related to their overall experience.
Industry experience is the most important factor in evaluating competence and capability for senior positions at fund management firms. MAS sets minimum experience requirements based on the licence category and the stage of professional maturity required to operate a regulated business engaged in fund management.
A CEO of an accredited/institutional Licensed Fund Management Company should have at least five years of relevant fund management or financial services experience. This is an experience in positions that involve progressively greater responsibility for investment management, client relationships and/or the governance of investment management operations, rather than broad financial services experience without a specific investment management component.
The CEO of a retail LFMC must have at least 10 years of experience in fund management, compared with 9 years for those appointed to other kinds of funds. The experience requirement for the CEO of a retail LFMC is higher, at least ten years of relevant fund management experience, as opposed to the nine-year requirement for the CEOs of other types of funds, due to the increased complexity of the work and investor protection concerns in a retail fund. It recognises that the extra experience requirement is necessary because retail fund management requires a greater level of understanding of conduct obligations, suitability evaluation, and the specific regulatory requirements applicable to publicly offered collective investment schemes.
Executive directors of fund management companies licensed by the MAS are expected to have backgrounds that are relevant to fund management operations and directors’ duties. The directors’ experience profiles will be considered in the context of the board’s overall profile. Still, the board as a whole should have the requisite expertise to provide effective governance oversight of fund management, financial, legal, and compliance matters.
In the case of appointed representatives, conducting fund management activities on behalf of the licensed entity, they should be competent in the nature and complexity of the investment activities they are authorised to undertake. Access to specific investment activities or asset classes may be granted to representatives with limited experience managing them, with enhanced supervision in place until they become competent.
A fund management company’s most senior positions, such as the CEO and executive directors, are subject to assessment of management and leadership capability as part of the competence dimension assessed by MAS. This assessment is not just about technical investment management competency; it is about the organisational leadership attributes required to manage a regulated financial services organisation.
MAS will require senior management of fund management companies to possess evidence of experience in investment management operations, governance, and oversight – covering the governance of compliance programmes, regulatory relationships, risk frameworks, and reporting to the fund’s clients. MAS will require these individuals, who are technically good investment managers but lack experience managing a regulated business, to serve as experienced directors or advisers before they can meet its criteria for approving the governance set-up.
In a fund management context, a history of constructive and transparent interaction with the financial regulators, be it in Singapore or elsewhere, is a favourable sign of the management capabilities. Those who previously managed and supervised entities regulated by MAS and that had good track records are looked upon favourably during the management capability assessment, as are those who have demonstrated effective interaction with MAS during times of difficulties.
MAS evaluates the quality of senior management’s identification and management of regulatory and operational risks. This means having the ability to escalate compliance concerns to the board, making tough choices that may prioritise regulatory compliance over short-term business opportunities, and creating a culture of compliance that extends beyond the formal compliance role.
If the fund management company has a small group of senior management members, MAS might consider whether the proposed governance structure would result in an undue concentration of key-person risk. Completely owner-dependent firms without a viable succession plan may need to establish a contingency plan to ensure operations continue without compromising factory compliance.
Competence is not a fixed attribute; MAS expects fund management professionals to keep up with and enhance their knowledge and skills through ongoing efforts and regular engagement in professional development programmes relevant to their roles and the evolving regulatory landscape. This continuous development requirement underscores MAS’s fundamental recognition that the fund management industry, its regulatory regime, and the financial landscape are constantly evolving, and that professionals who are not proactively engaged in ongoing development may become “unfit” in a manner not captured by a single licensing test.
As part of the IBF’s Standards, Skills and Training (SST) framework, representatives of fund management companies licensed by the MAS are required to complete certain annual continuing professional development (CPD) requirements. These CPD rules apply to the regulatory, technical, investment, and ethical requirements for the representative’s specific activities and licence scope.
MAS will promote IBF-accredited qualifications for fund management practitioners and encourage practitioners to join IBF’s professional accreditation framework as a process to demonstrate continuous competence and continuing professional development. The IBF-accredited professionals are considered to demonstrate the defined competencies that meet MAS’ supervisory expectations.
There are no prescriptive CPD requirements for directors and CEOs of fund management companies, similar to those that apply to appointed representatives; however, MAS expects senior management of fund management companies to keep abreast of developments in the regulatory framework, best practices in risk management, and the evolution of the investment management industry. Active participation in industry associations, regulatory consultations and professional development programmes is a real signpost of this commitment to ongoing development.
All key individuals in fund management companies should keep abreast of the latest changes to the applicable regulatory framework of the MAS for their institution, such as changes to the Securities and Futures Act, MAS notices and supervisory guidance, and ensure that their knowledge of the regulatory framework is reflected in their daily decision-making and governance activities. One prevailing weakness that leads to compliance issues and adverse supervisory findings by MAS is a lack of regulatory knowledge in senior management.
The third of the four major criteria used by MAS to evaluate fit and proper is financial soundness, which includes both the personal financial health of key individuals and the financial capacity of the fund management entity. The reason for measuring personal financial soundness is simple: a person in serious financial trouble – especially one whose troubles were caused by poor financial management, excessive risk-taking, or dishonest conduct – poses a high risk of engaging in similar behaviours when handling fund investors’ assets. MAS’s financial soundness assessment is proportionate and contextual, rather than exclusionary, and is intended to provide information to ensure that those who hold fiduciary functions are financially sound.
The financial soundness assessment includes the assessment of the individual’s present financial condition, which must include any outstanding indebtedness that could affect his or her independence from the pressures to behave in a manner dishonest or unscrupulous that is likely to impair his or her professional judgment; his or her history of financial problems, including insolvency, bankruptcy, or default; and the nature of the circumstances that led to financial problems, especially whether they involve behavior that is relevant to the financial honesty and integrity element of the assessment. MAS evaluates financial soundness based on self-disclosure in the individual’s fit-and-proper declaration, as well as reference checks and background verification. People should be open and honest about their financial situation and background, and failure to disclose financial problems is considered an integrity problem as well.
Personal financial difficulties (such as bankruptcy, formal debt arrangements and ongoing debt defaults) should be handled with care in the context of a MAS fit and proper application. Each incident is evaluated on an individual basis for nature, circumstances and consequences.
Under the Companies Act 1967, an undischarged bankrupt is not permitted to hold a directorship in a Singapore company, including a fund management company. A direct MAS will not consider a directorship application if the applicant is an undischarged bankrupt, unless he or she discloses this status, and is generally required to wait for discharge and to ensure that he or she has re-established financial rehabilitation after bankruptcy before applying for a directorship.
Although not a disqualification, MAS will consider the circumstances in detail. Some considerations include the size of the debt, the cause of the bankruptcy, any indications of dishonest behaviour, the time since discharge, and the individual’s financial or professional standing since the bankruptcy. If a business fails due to a market downturn, a bankruptcy will be treated very differently from one in which there was a failure to manage the business responsibly or in which assets were concealed through fraud.
Where an individual has come under any formal debt arrangements (including individual voluntary arrangements and debt restructuring under court supervision), these arrangements should be made known in the fit and proper declarations. MAS will have to evaluate whether the arrangement was made in good faith as a responsible way to manage financial problems, whether the individual is complying with the terms of the arrangement, and whether the amount of any continuing financial obligations creates a material conflict of interest with the individual’s fiduciary duties.
When evaluating financial soundness, outstanding civil judgments for debt, repeated failures to pay debts, or financial disputes that indicate a reluctance rather than an inability to pay will be viewed negatively. Those subject to civil debt proceedings should proactively disclose this and, where possible, settle any outstanding financial obligations before or during the application process.
The financial soundness criterion is assessed separately but related to the financial health of the fund management company itself (as opposed to the personal financial positions of key individuals). A fund that is under strain in its own right has raised concerns about its ability to maintain compliance with its programme, meet regulatory capital requirements, and fulfil its long-term commitments to clients and counterparties.
The minimum paid-up capital that fund management companies (FMCs) need to meet for their CMS licences varies by the type of fund they manage, ranging from S$250,000 for A/I LFMCs to S$1,000,000 for retail LFMCs. This capital will be made available at the time of the application, will be free from any pre-existing commitments and will not rely on funding that has not yet been raised.
At all times, CMS licensees must maintain financial resources equal to at least 120% of their total risk. MAS evaluates whether the proposed fund management company can maintain this ratio in the future, not just during the application process, and whether the projected revenue base and cost structure are credible in light of the applicant’s business plan.
The financial statements included in the business plan are assessed for credibility and feasibility. Business plans with unachievable growth rates, unusually low operating expenses, or revenue from unproven sources will be doubted. MAS is looking for business plans that don’t have such a rosy financial outlook; it’s unrealistic to meet minimum viability requirements on paper.
In addition to the corporate financial soundness review, the financial condition of key shareholders of the fund management company is evaluated, including those shareholders that have provided or committed to provide capital to the fund management company. Investors with precarious financial situations, or who are investing their own money in a fund whose value depends on uncertain future events, may have concerns about the fund management company’s ability to sustain their investment.
Capital adequacy is required not only to secure a licence but also as a continuous regulatory requirement. MAS’s framework of capital adequacy for fund managers aims to ensure that licensed fund managers have adequate financial resources to continue to operate and fulfil their obligations during periods of business stress or during low periods in their revenue, such as when they experience unexpected outflows of assets under management, loss of key clients or adverse market conditions that negatively impact management fee income.
The Total Risk Requirement is a capital requirement for fund management companies that shows the operational and market risks that the firm faces and must be maintained at a minimum of 120% of the capital requirement at all times. Fund management companies in the early stages of operation need to maintain this ratio and, in general, keep a capital buffer above the minimum to account for fluctuations in income and spending. MAS expects fund management companies to have internal capital planning processes that provide forward visibility into their capital adequacy position and alert management to take action well before the ratio hits the minimum requirement of 120%.
The fit and proper assessment is one of the most important aspects of the licensing process for directors of a fund management company licensed by MAS. MAS reviews the fitness of each proposed director and the overall competence of the proposed fund management business in terms of the combined experience, qualifications, and diversity of views of the board members.
Another form of fitness is granted to significant shareholders, defined as those who hold or control 5% or more of the shares of the fund’s management company, or who can exercise significant influence over the management or policies of the management company. MAS reviews the identities of significant shareholders, their ultimate beneficial ownership, and their regulatory positions within the fund management company to determine whether there are any risks to investor protection, market integrity, or regulatory oversight arising from the fund management company’s ownership structure. Shareholders not easily identifiable to MAS to its satisfaction, or with a serious adverse regulatory or criminal record, may hinder or prevent licence approval, despite the fitness of the company’s proposed management team.
The place for scrutiny in any fund management licence application is the CEO. The evaluation is based on MAS’s expectations of the CEO as the main bearer of management responsibility for the fund management company’s regulatory compliance and governance practices.
The CEO shall have an ordinary place of residence in Singapore and shall be engaged in the business of the fund management company on a full-time basis. A sound test is applied by MAS of what is ordinary residency and what is active management: someone who is primarily resident in another country but who comes and goes between Singapore and that other country frequently may not be considered primarily resident in Singapore, even if he or she may have been registered as nominally resident for tax or administrative purposes.
The background of the company’s CEO should be closely aligned with the activities the fund will undertake in managing the company. While a background in banking or corporate finance may provide the necessary background for a CEO of a CMS licensee, it might not meet MAS’ Competence requirements for a fund manager in a discretionary portfolio management role, unless supplemented by other qualifications, relevant advisory experience or a strong supporting management team.
Previous adverse fit and proper findings – for example, as part of the application for a previous licence, from a regulatory investigation or from a supervisory proceeding – should be disclosed by individuals who have previously been the subject of such findings. MAS takes a serious approach to prior adverse determinations and will consider the circumstances, the time elapsed, and the ability to provide evidence of subsequent rehabilitation before making a new determination.
In addition to the CEO, MAS will evaluate the fitness of other senior management personnel whose roles are critical to the regulatory compliance and risk management of the fund management company, such as the Chief Financial Officer, Chief Risk Officer, and Chief Investment Officer. This evaluation varies across firms based on their size and complexity, with MAS reviewing the backgrounds of all C-suite appointments at larger or more institutionally complex fund managers.
Appointed representatives are people who perform regulated activities for the CMS licensee, such as portfolio managers, traders and relationship managers who advise clients on investments. Before any person can undertake regulated activities on its behalf, the proposed representative must meet the fit-and-proper tests set by MAS, pass the relevant exams, and be formally appointed by MAS via its electronic licensing system.
The persons designated to carry out fund management activities on behalf of a CMS licensee shall undergo the corresponding exam programme by the IBF and pass the papers. The specific papers required will depend on the type of regulated activities the representative will conduct. Discretionary fund managers are likely to need to undertake the Collective Investment Schemes Module 6, and/or Securities and Futures Product Knowledge Module 6A.
MAS offers exemptions from the CMFAS examination requirements for those who hold other professional qualifications equivalent to those recognised by MAS, such as the Chartered Financial Analyst (CFA) designation, postgraduate qualifications in finance from recognised institutions, or professional qualifications recognised by IBF. Applicants who will be relying on qualification exemptions must submit evidence of the relevant qualification with their representative appointment application.
Portfolio managers, especially those who will assume sole discretionary management authority over client portfolios, should possess relevant investment expertise to perform their duties competently. While MAS does not require all portfolio managers to have a specific level of experience, firms are expected to indicate in their application that each proposed portfolio manager has the requisite experience and competence for the investment strategies and asset classes they will manage.
Fund management companies can recruit junior representatives or trainees who are not qualified or experienced, provided they are under the proper supervision of a more experienced, qualified representative. The supervision arrangements should be recorded and commensurate with the degree of independence entrusted to the supervised person.
Compliance and risk management staff play a vital role in the fit and proper framework – the individuals who are most directly accountable for the fund management company’s ability to meet the regulatory requirements prescribed by MAS, and their fitness and competence will directly affect the quality of its regulatory compliance programme.
The compliance officer, who may be either a separate compliance officer or a member of senior management with compliance duties, is required to meet MAS’s fit-and-proper requirements and possess relevant qualifications and experience in the compliance function. MAS expects compliance officers to be familiar with the regulatory structure relevant to the fund management company’s work and to exercise some degree of compliance oversight over the company’s work without relying entirely on external compliance advisers for basic regulatory guidance.
MAS examines whether the compliance arm of the proposed fund manager is separate from the company’s revenue-generating activities. A compliance officer reporting to a portfolio manager, or a business development head, but not to the CEO or directly to the board, does not meet MAS’s independence criteria. The compliance reporting line is evaluated within the context of the overall governance review.
MAS evaluates the effectiveness of the proposed risk management function to ensure that it is sufficiently independent and knowledgeable to provide credible risk oversight in the context of the fund management company’s investment risk, operational risk or leverage. This encompasses the qualifications and experience of proposed risk management personnel as well as the quality of the proposed risk monitoring framework and the extent to which risk management outcomes are escalated to and responded to by senior management and the board.
The AML/CFT responsible officer of the fund management company should be named in the licence application and should meet MAS’ fit-and-proper requirements. This role is usually the compliance officer, but in larger fund management businesses, it may be held by a different senior person with specific AML/CFT expertise and responsibilities.
The comprehensive information-gathering process supports the fit-and-proper assessment of each key individual involved in a fund management licence application. Each Director, CEO and Appointed Representative will be asked to complete a detailed personal declaration form (usually referred to as a MAS Personal Declaration or equivalent regulatory declaration) that details the complete particulars, employment history, education and professional qualifications, regulatory licensing history, criminal history, civil proceedings history, financial history and any other circumstances that may be relevant to the fit and proper assessment.
Aside from the personal declaration, individuals are usually required to submit certified copies of identity documents, qualification certificates, and professional examination records; detailed employment history documentation, including references from previous employers; and documentation of any adverse matters disclosed, including court documents, decisions, or correspondence with previous regulatory authorities, as applicable. Completeness and accuracy of these documents are qualifying conditions: Incomplete applications and applications with internal inconsistencies will be returned for correction, thereby increasing the overall application process time and creating doubts regarding the applicant’s diligence and transparency.
MAS is not solely dependent on the disclosures in an applicant’s fit-and-proper declaration. It conducts its own research and information verification through various channels to verify the accuracy of the information provided and to detect any negative issues that have not been voluntarily disclosed.
MAS seeks the regulatory references from the relevant regulatory authorities in each jurisdiction in which an individual is licensed, registered or supervised as a financial services professional. These references usually include details of the person’s licensing history, any regulatory actions against them, and any adverse matters relevant to the fit-and-proper assessment. Foreign regulatory reference times can also be a key factor in the overall application process.
Where the individual has lived or worked in other jurisdictions, MAS verifies the criminal record disclosures by conducting a check with the relevant law enforcement agencies or regulatory bodies. People with a background check history from more than one jurisdiction will have a multi-jurisdictional background check.
Financial soundness assessment may involve the credit checks and searches of a financial disclosures register, as well as searches of bankruptcy and insolvency registers in relevant jurisdictions. People with previously reported financial problems should ensure their disclosures align with what will be returned through these verification methods.
The information about all professional qualifications, degrees, or certificates stated in the application is verified directly with the awarding body or the institution that awarded them. Non-verifiable qualifications and/or qualifications that are inconsistent with the institution’s records will result in an adverse fit-and-proper finding regarding the institution’s honesty and integrity.
As part of its fit and proper assessment, MAS can request an interview with the proposed key individuals if it has specific questions it wants to explore further in the application, or if the individuals concerned are not those with whom it has previously had regulatory contact. MAS supervisors carry out interviews and usually involve information about the individual’s professional background and experience, his or her understanding of the regulatory requirements that will apply to the proposed fund management company’s activities, his or her compliance and governance approach, and any negative items that showed up in his or her fit and proper declaration.
Interviews are not adversarial — MAS sees them as an opportunity to establish a clearer picture of the candidate’s suitability for the position, not an examination of what they have disclosed. Generally, people with a sound knowledge of their regulatory obligations, honesty about any negative aspects of their history, and the ability to articulate a clear understanding of their obligations and responsibilities will do well in the interview. An evasive or inconsistent person, or a person who cannot demonstrate a legitimate understanding of the compliance requirements for their proposed position, will raise concerns that could affect the evaluation result.
Knowing the expected review and approval period set by MAS, as well as the factors that can extend it, is crucial for fund management companies when planning to obtain a license.
MAS aims to review a complete licence application within 3 to 6 months. However, the fit and proper assessment process may take many times longer if adverse matters need to be investigated, regulatory references are sought from various foreign jurisdictions, or further information is required from applicants. The applicant should expect a reasonable timeframe and should not enter into any commercial agreements that rely on the licence being finalised by a specific date.
Incomplete and poor applications are the number one determinant of the speed of MAS’s review. A complete application, with all necessary supporting documentation, is much quicker to process than one that must be sent back and forth for additional information. The first time it is submitted, invest in its quality to help manage the licensing timeline.
Prospective applicants for CMS licences may attend pre-application consultation meetings provided by MAS, during which MAS supervisors will provide guidance on the application requirements and may offer initial views on either key personnel profiles or aspects of the proposed governance structure. These meetings can be requested free of charge to address potential fit and proper issues early on and provide applicants the opportunity to address them before submitting the formal application.
In some cases, MAS may conditionally approve a licence application. At the same time, a particular fit-and-proper concern is being addressed, such as whether a regulatory reference from another jurisdiction has yet to be received, or whether an adverse matter has been disclosed but is still pending judicial proceedings. Conditional approvals require the licensee to undertake certain obligations (e.g., to notify MAS of the outcome of pending proceedings). They are either revoked or converted to unconditional approvals based on the outcome of a pending matter.
The fit and proper test for Singapore’s financial industry is not just a test at the stage of obtaining a licence — it is a continuing test that must be met by all key individuals of an MAS-licensed fund management company throughout their engagement. In its guidelines, MAS explains that the fitness and propriety of key individuals will be a condition of the fund management company’s licence and that, if there is a material deterioration of the fitness of any key individual, MAS will consider taking supervisory action, including revoking or replacing the licence of the fund management company.
The continuous compliance standard implies an ongoing obligation for fund management companies to review key persons for fitness and propriety, not just at the time of initial appointment. This monitoring obligation imposes on the fund management companies the need to establish internal procedures to identify the changes in the personal, financial, or professional circumstances of key individuals, which may be relevant to their continuing fitness assessments and to take the necessary action, if any, with respect to the change, such as communicating with the compliance officer and, if appropriate, notifying MAS. A fund management company’s misguided focus on the initial licensing application can lead it to believe that the compliance monitoring requirements are not burdensome enough to warrant continuous monitoring, which is often not the case.
Material changes in the circumstances of key members of a fund management company must be reported to MAS within specified timeframes. This is a very general definition of ‘material change’, and can apply to personal, professional and financial changes in a person’s life.
The fund management company shall, without delay (but no later than 14 days), notify MAS of any criminal offence against any key individual that is charged with, convicted of, or subject to a criminal investigation in any jurisdiction. Notification must be given even if the abuse or incident is connected to the financial services the person is engaged in, or to the severity of the alleged behaviour.
Any regulatory action (e.g. investigation, censure, monetary penalty, suspension or withdrawal of a licence) taken by a financial regulatory authority in any jurisdiction against a key individual should be reported to MAS immediately. As MAS’s fit and proper assessment has cross-border application, regulatory activities carried out in other jurisdictions will affect the individual’s regulatory standing in Singapore.
When MAS receives notice of a material deterioration in an important person’s personal financial position, such as the filing of a bankruptcy petition, the initiation of a formal debt arrangement, or a substantial civil judgment against the person, it must be reported to MAS. The fund management company should ensure that key people are aware of their responsibility to promptly advise the fund of any significant financial change, which allows the fund to notify MAS within the timeframes mandated by the MAS notification rules.
Civil proceedings, arbitral proceedings, or regulatory investigations involving allegations of conduct that may relate to the fit and proper assessment, regardless of whether criminal or regulatory action is taken, should be disclosed to MAS, including fraud, misrepresentation, breach of fiduciary duty, or financial misconduct. The concept of materiality for disclosure is quite broad. In the absence of clarity, it is prudent to disclose and seek MAS’s opinion on whether it poses a material risk to the individual’s ongoing fitness.
It is not just a good governance practice; it is a regulatory expectation for all fund management companies licensed by MAS that key individuals are continually monitored for ongoing suitability. MAS expects fund management companies to have internal systems and procedures in these circumstances, properly documented in their compliance manual and monitored by the compliance function, including the timely identification and assessment of material changes in the circumstances of key individuals, and escalation and disclosure as necessary.
Many fund management companies require key individuals to make a fit-and-proper declaration annually. This involves directors, the CEO, and appointed representatives assuring MAS that their personal, financial, and professional situations have not materially changed since the last notification to MAS and, if they have, notifying MAS. The annual declarations serve as a framework for the monitoring process and provide the compliance officer with a record to verify key persons’ continued fitness to carry out their duties.
The compliance officer shall regularly review the qualifications and CPD of all appointed representatives to ensure that they remain qualified to the required level under CMFAS, have completed the required hours of CPD within the last year, and are working within their scope of appointment. Representatives with lapsed qualification(s) and those not practising within the scope of their authorisation must be dealt with through the regulatory pathway.
Where sufficient resources are available in the fund, periodic background screening programmes (as provided by commercially available background screening services) may be used to identify public records of key individuals that could be relevant to the fund’s continuing fitness. This can be especially useful for firms where major changes in the regulatory climate or financials might not be readily apparent in the firm’s internal operations.
A structured exit process, including a review of any pending regulatory matters involving the individual, documentation of the reason for the individual’s departure, and timely notification to MAS of the appointment change, should be followed when a key person leaves the fund management company, whether due to resignation, retirement, or termination. If a student simply walks out of the school without informing MAS, or immediately goes to a competitor without any transition, it can be noticed by the supervisors.
Its failure to be fit and proper, if uncovered at the time a licence is applied for or during the institution’s licensed life, will have serious and complex repercussions. It is crucial to have robust, continuous monitoring to appreciate these consequences better.
MAS may refuse to issue a CMS licence (or may decline to approve the appointment of a given key individual) if the outcome of the fit and proper assessment is adverse. A refusal is a matter of public record, which has long-term implications on the reputation of the individual and the firm, and could be shared with regulatory counterparts in other jurisdictions via MAS’s international information-sharing arrangements.
If, during a regulatory investigation or after a criminal conviction, or if MAS believes the key individual’s financial or personal situation has significantly changed or declined, MAS may ask the fund management company to remove the key individual from their position. Failure to do so would also be a regulatory violation, which could lead to an enforcement action against the fund management company.
Where the concern is less serious, a fit and proper concern, MAS may impose conditions on the fund management company’s licence, instead of refusing or revoking the licence, such as adding more stringent supervision of a particular individual, narrowing down the range of activities that the individual is allowed to undertake, or appointing a further senior manager of proven experience to oversee it. These conditions are unnecessarily cumbersome and restrictive to business and, therefore, are more valuable to prevent than to remediate.
MAS may take formal action, such as imposing civil money fines, issuing public censures or referring the firm to the Public Prosecutor for criminal investigation if a material change in the key individual’s circumstances has not been notified to MAS as required, or the continued presence of such key individual has caused harm to investors or a breach of regulatory requirements. In Singapore, a tight-knit financial services community, the impact of public enforcement action is never short-lived.
The biggest reason for delays in obtaining MAS assessment for senior management positions in fund management companies is a lack of relevant industry experience. Even in the face of a strong professional profile, applicants seeking appointment as a CEO or executive director who do not provide clear evidence of experience in the fund management sector, but have experience in related financial services sectors, such as corporate banking, private banking, insurance and financial advisory, may find it difficult to meet MAS’s competence criteria for that position.
Addressing an experience gap means that the applicants must carefully consider how the skills and knowledge they bring to their role can be applied directly in the fund management environment — and articulate the applicant’s experience in a manner that demonstrates how the skills and knowledge that they bring to their role will apply to the specific regulated activities the applicant proposes to engage in as a fund manager. A practical approach, often adopted, is to augment the competence of the proposed management team with additional experienced directors and advisers to meet the applicable threshold when there is a gap in the competence of the former. Compliance with the MAS licensing criteria by fund managers and specialists qualified to evaluate the experience profile before the formal application is submitted enables the applicant to address gaps proactively rather than face surprises during the MAS licensing review process.
Poor governance structures, such as the concentration of management responsibilities, poor board composition, and non-independence and/or non-authority of compliance functions, are frequent drivers of negative MAS assessment results for fund management licence applications.
If a fund management firm proposes a governance structure where the entire governance role is vested in one person, with no credible succession plan in place, no experienced non-executive directors to provide independent oversight and no supporting senior management team, then they are likely to have difficulty in meeting the standards in the governance assessment in the MAS. MAS expects the fund management company to sustain its operations and regulatory compliance even in the event of the unavailability of any single key individual.
In the governance review, adverse assessment will be drawn to non-executive directors who lack financial services experience, are not genuinely independent of the key shareholders of the fund management company, or cannot demonstrate the capacity to offer meaningful oversight of the fund management operations. Having non-executive directors who are well-known, but not necessarily board experts, is not expected to meet MAS’s board adequacy criteria if they do not make meaningful contributions to the board.
Proposed compliance functions that fall under the business line management, or that are inadequate in resources to oversee the compliance functions of the fund management company effectively, or that are proposed to be dealt with exclusively by a shared service centre or an external provider, will be challenged during the MAS assessment. MAS believes that the compliance function should exist with independence, authority, and a presence within the fund management company.
A failure to have clear, documented procedures in place to identify and address conflicts of interest – including those that may exist between the interests of the shareholders, employees and fund management company, and the investors whose funds are managed by the company – will result in adverse governance assessment findings for fund management companies. Conflict of interest management is one of MAS’s governance measures that places a high emphasis in the context of licensing.
The least desirable error an applicant can make in the fit and proper assessment process is an inadequate or incomplete disclosure of material information. MAS takes non-disclosure seriously, even if the undisclosed information would not necessarily have been disqualifying, as it directly affects the honesty and integrity of the assessment. An applicant who is found to have intentionally or carelessly omitted to disclose a material matter will be assessed twice: on the underlying matter itself and for failing in honesty and integrity as a result of the omission.
The most typical documentation and disclosure shortcomings are: not providing all criminal records, such as spent convictions or convictions from outside Singapore; not providing full employment history, such as self-employment history or periods of unemployment, which may have been glossed over in the outline of the applicant’s chronology of events; and not disclosing civil matters, especially those settled confidentially. Candidates who are unsure whether a specific issue needs to be disclosed should always disclose it and seek advice from informed professionals on the regulatory requirements of fund managers’ advisers before submitting their disclosure.
The fit-and-proper assessment of fund management professionals who work across jurisdictions is a complex challenge for both the applicant and MAS. Effective cross-border regulatory history management requires diligence and communication.
SPI holders are required to keep a close eye on their transaction volume for the previous 12 months, and to begin the MPI licence variation process in time to receive MAS approval before the transaction volume thresholds are met. Companies are in breach of regulatory conditions if they go beyond the SPI thresholds without an approved MPI variation.
Factual and regulatory measures by foreign regulators are evaluated with reference to the standards and practices of that jurisdiction, not just Singapore’s. A person who a regulatory body has given a formal warning in a jurisdiction with more rigorous standards of conduct may be treated differently from a person who has received a similar action in a jurisdiction where the regulatory process is less developed, but only if the person can provide an appropriate context and explanation.
Where possible, applicants licensed in foreign jurisdictions should provide regulatory references from those jurisdictions before applying for MAS licensing — rather than waiting until MAS requests them. Foreign regulatory references can help expedite the application review process when available at the time of application and can be helpful for proactively communicating foreign regulatory activity.
Employment gaps are especially significant in the application, especially if they include a period of self-directed activity or transition or a period without employment, and must be clearly explained. A gap in a career is not a concern to MAS itself; however, any gaps in the material will be considered, and MAS will be prepared to confirm an individual’s activities during any such gap based on available records and references.
A fit-and-proper assessment requirement, as well as a long-term asset for a fund management company, is well-designed governance. Beyond the written credentials of nominated directors and management, MAS evaluates governance quality through the design of the governance structure, including the clarity of reporting lines, the strength of oversight mechanisms, and the robustness of escalation and accountability processes. Companies that invest in good governance – not just meet minimum governance standards – tend to be in a better position in both licensing assessments and regular supervisory engagements with the MAS.
The successful implementation of governance measures includes: appointing independent non-executive directors from a financial services, legal or compliance background who can provide substantive governance oversight; introducing formal board committees – such as an audit or risk committee – with clear mandates and reporting requirements; introducing a compliance reporting framework which ensures that the board receives regular substantive information about the fund management company’s regulatory compliance posture; and documenting all governance decision-making activities in board minutes that demonstrate that decision-making took place, and that the board was held accountable for its activities.
The supporting evidentiary basis for the fit and proper assessment comprises comprehensive compliance records, both for the fund management company’s application and throughout its licensed life. An incomplete or inconsistent record, or a record that cannot be produced promptly for inspection by MAS, will result in adverse assessment outcomes, irrespective of substantive compliance.
The compliance function should keep personal declarations in a secure, indexed archive with all those completed at the time of initial licensing and any amendments made due to material changes. The documents are the primary record of the fund management company’s fit-and-proper assessment history and can be called for by MAS at any time.
All key individuals’ and appointed representatives’ certificates of educational and professional qualifications, CMFAS examination results, IBF accreditation evidence, and evidence of CPD completion should be kept in a current, retrievable format. MAS will routinely request qualification records during supervisory reviews, and they are expected to be available for production immediately.
The fund management company should keep records of all background checks performed on key individuals, including when they were conducted, who they were conducted on, what was searched, and what was found. The records show this is a monitoring duty being discharged, not a nominally discharged one.
If any key individuals have disclosed adverse matters (such as actions taken by regulators, civil proceedings, or financial difficulties), there must be a full record of the matter disclosed, the MAS response, and evidence of remediation or resolution. These records are crucial for providing future context for any MAS assessment that revisits the matters disclosed here.
Internal suitability assessments, which are a prerequisite before key individual appointments are put forward to MAS by the fund management company’s compliance function, are an investment in regulatory risk management and organisational efficiency. Internal assessments enable the fund management company to pre-empt potential issues and avoid reputational damage that may result from a failed MAS application, while also maintaining the management team’s confidence in the appointment process.
The fund management company must have a documented pre-appointment screening procedure for all proposed key individual appointments that covers verification of the individual’s criminal record, regulatory history, financial background, and professional qualifications, and a structured review of their personal declaration. This procedure should take place before making any conditional employment offer to a proposed key individual.
The fund management company should create a formal internal assessment panel, consisting of the compliance officer, a senior director, and (if applicable) an external legal or compliance adviser, for senior appointments, especially those with titles such as CEO, executive director, or compliance officer. The panel should note the assessment, and the reasons for it should be recorded and kept as part of the fund management company’s governance records.
The fund management company should also undertake substantive peer reference checks on candidates for senior management positions, including face-to-face interviews with former co-workers, supervisors, and regulators regarding their professional conduct, management style, and regulatory history. Qualitative reference checks are used to supplement the formal documentary screening process and may raise issues which are not reflected in the formal documentation.
In addition to initial suitability evaluations, the fund manager should review the suitability of all key staff annually (primarily through the annual personal declaration process, but also through an analysis of any information about the person that has become available during the year as a result of regulatory communications, background monitoring or internal observations).
The complexity of the MAS fit-and-proper assessment framework, combined with the importance of the outcome of an adverse assessment, makes early engagement of professional advisers one of the most impactful investments the fund management company can make in its licensing journey to Singapore. Fit and Proper requirements for fund managers’ advisers specialising in MAS licensing processes can have the ability to help identify fit and proper concerns before the formal application, advise on how to present complex and adverse circumstances in a way that directly addresses MAS’ concerns openly and transparently, and manage the application process to maximise the quality and completeness of the initial application.
Having legal counsel with hands-on experience in MAS licensing transactions and fit-and-proper assessments will give applicants access to practical insights into MAS’s assessment criteria, current supervisory concerns, and disclosure and presentation requirements developed through prior MAS applications. This information is not reflected in MAS’s published guidelines and can therefore significantly enhance the application.
MAS provides pre-application consultation meetings for prospective applicants for fund management licences. They are informal consultations offered free of charge upon request that enable an applicant to seek initial MAS comments on specific issues in the proposed governance structure or key personnel profile before submitting a formal application. If an applicant has raised any concerns about a specific team and has a general idea of how MAS will address them, they should discuss these with MAS in pre-application discussions before committing to the full application process.
A compliance adviser who has experience in fund management licensing in Singapore can help fund management companies design their fit and proper and governance structures, compliance programme, and key personnel reporting structures from the outset, which will satisfy MAS requirements — as opposed to having to undergo a costly re-structuring when their application for a fund manager’s licence is denied, or conditions are imposed. Early involvement of the compliance adviser also enables applicants to gain insight into the ongoing fit-and-proper monitoring duties they must meet as CMS licensees.
The ideal time to involve professional advisers is before the fund management company makes key commitments regarding proposed governance arrangements and key persons that may need to be changed in response to the MAS assessment. Advisers who are brought in after a proposed management team has been formed and presented with employment contracts will have less flexibility to consider fit-and-proper matters when the management team and its governance are under discussion as part of the planning process.
Fit and proper assessment is the most basic condition for a CMS licence for fund management — it is the gateway that governs and manages the fund management company’s staff, whether they are apt to serve their investors in regulated financial markets in Singapore. An adverse fit and proper result will be a black cloud that hangs over the entire licensing assessment process: even if the fund management company has a good business plan, adequate capital, and a good compliance program, it will not be granted a CMS licence if the key individuals it is proposing to hire do not meet MAS’s fit and proper requirements.
This primacy of fit-and-proper evaluation aligns with MAS’s perspective, shared by the international regulatory community, that the quality of the individuals who run a financial institution will determine its long-term regulatory compliance. The effectiveness of systems, controls and policies can all be achieved. Still, they only work when the people who implement and monitor them are strong in integrity, competence and financial strength. The fit and proper assessment, therefore, represents a necessary condition and is not only one of the conditions that constitute the license, but also the basis for all other licensing conditions.
The fit and proper assessment does not stop at the time of licence approval. Still, it will continue to influence the relationship between the fund management company and MAS during its licensed life. Current regulatory status largely depends on the quality and continuity of key personnel at the licensee.
In addition, the management companies of financial institutions that have a good supervisory history and have consistently met the regulatory requirements, by publishing material changes, ensuring their fit and properness and keeping current with their qualifications and CPD and having no adverse events in their supervisory record, will have a more positive regulatory relationship with MAS as they move forward. This supervisory trust capital is a growth process and cannot be easily produced quickly.
The assessment of the variation application will be based on MAS’s assessment of the current regulatory standing of the existing fund management company, including its ongoing fitness as an A/I LFMC or a retail LFMC, as well as the fitness of its key individuals. Licensees with a good supervisory history have quicker, more streamlined processes for assessing variations.
A licensed appointed representative or key manager of a Singapore CMS licensee will have their regulatory history carried over when there is a change in regulated entities. MAS will consider the individual’s track record at other licensed entities, including any regulatory actions taken, compliance deficiencies, or adverse assessments resulting from previous roles, when assessing the individual’s suitability for his new role.
The standing of key persons in a fund management company has a direct bearing on its AML/CFT supervisory standing, as the overall quality of the AML/CFT programme is evaluated against the quality of the fund management company’s governance. Consequently, key individuals at fund management firms that are the subject of ongoing AML/CFT fit-and-proper issues are likely to be targeted for increased AML/CFT supervision.
The regulatory relationship with MAS is only one of the commercial implications of the fit-and-proper standing of key people within a fund management company. Institutional investors, family offices, and sophisticated high-net-worth investors perform due diligence on the governance and quality of the fund manager they wish to allocate to, and the results of MAS’ fit and proper are among the chief considerations in this commercial due diligence.
When investors are interested in investing in a fund, the governance of the fund management company is validated through a due diligence exercise under MAS’s licensing framework, and the individuals in key positions have clean and well-documented fit-and-proper records, it is well placed to present its institutional credentials to investors. On the other hand, a fund management company that has faced fit and proper issues – such as slow licensing progress, conditions imposed on its licensing or enforcement action by the public against the conduct of key individuals – will have a much harder time securing institutional capital, building prime brokerage relationships, and accessing the service provider ecosystem necessary to run a credibly institutionalised fund management business in Singapore.
The fit-and-proper framework underpins the ongoing relationship between the fund management company and MAS. Good relations between the fund management company and MAS require a proactive, transparent approach that goes beyond the minimum disclosure requirements.
The development of a culture of proactive disclosure by fund management firms, in which material changes to the circumstances of key individuals are made known to MAS immediately, not merely when there is clear legal requirement for disclosure, but when there is reasonable doubt whether a development is material enough to require disclosure. In all cases, MAS is more likely to respond positively to proactive disclosure than to matters found by its own supervisory efforts.
Responses to information requests, responses to supervisory queries, and applications for licence variations or appointments as key individuals must be accurate and complete. They should be structured and presented to help MAS evaluate the application, rather than primarily to minimise adverse findings. True transparency in regulatory relationships is more enduring and more commercially valuable than compliance transparency.
Regulatory affairs should be recognised as a critical internal activity for larger fund management firms and managed by a dedicated team with dedicated resources, and by accountable senior management responsible for regulatory filing compliance, fit-and-proper monitoring, and supervisory engagement with the MAS. The quality of the regulatory affairs function directly impacts the quality of the MAS regulatory relationship and, consequently, the fund management company’s long-term regulatory position.
By actively participating in the regulatory policy development process, such as by participating in public consultations, submitting substantive comments on consultation papers, and getting involved in industry working groups facilitated by MAS, fund management companies gain a more thorough understanding of the priorities of MAS’s regulatory policies and show MAS how they are committed to working with the regulator to promote Singapore’s financial regulatory ecosystem.
It has covered the basics of the fit and proper test — its core standards of honesty, competence, and financial soundness, the procedure for applying the test, and the need to repeatedly review and monitor it — as well as the commercial and regulatory consequences of the test. These are the key principles to take forward:
Fit and proper does not exist as a one-off hurdle to be overcome at initial admission to the register and then ignored — it is an ongoing standard that fund management companies need to continually maintain through ongoing monitoring, proactive disclosure, and active involvement in governance throughout their licensed life. The cost of failing to fit and pass after licensing is often much higher than the cost of the monitoring infrastructure in place to prevent such failures.
The best way to undertake the fit and proper test is through genuine transparency – disclosure of material matters upfront, presentation of adverse information as presented and in full context and frank dialogues with MAS on challenges and uncertainties. Genuine transparency has a more positive effect on MAS’ response than the perception that institutions have made disclosures strategically.
The most telling indicator of a fund management company’s long-term regulatory compliance is its governance, including the true independence and participation of its board, the power and capability of its compliance team, and the integrity of its senior staff. After all, the key purpose of MAS’ fit-and-proper framework is to assess this governance parameter, and institutions that focus on the substance of their governance rather than its form tend to achieve better regulatory outcomes.
One of the best investments in fit and proper compliance is to hire qualified MAS licensing criteria for fund managers advisers in the planning phase, before the management team is put together, before governance is determined and before formal applications are made. Proactive advisory engagement is the ability to pinpoint and address fit-and-proper concerns at the lowest cost and with the greatest flexibility.
It’s not just a regulatory requirement; it’s a commercial asset for meeting MAS standards. A fund management company with clean, well-documented regulatory history, and whose governance structure has been evaluated by the MAS through an intensive licensing process, is more likely to be able to attract institutional capital, obtain service provider agreements and foster investor confidence, which is the key to a sustainable business in fund management in Singapore.
Long-term regulatory credibility in Singapore’s fund management industry is developed by the steady stream of positive supervisory interactions — timely and accurate regulatory filings, prompt disclosure of material developments, candid engagement during the course of a supervisory review and well-prepared licence applications representative of the true quality of the fund management company’s governance and personnel. This is not a formal accreditation granted by MAS, but is built up over time through consistent, transparent, and compliant behaviour, which leads to higher levels of supervisory trust and, therefore, a lower overall regulatory risk profile for the institution and a more constructive supervisory relationship.
The fit and proper framework is the starting point for Singapore’s regulated fund manager industry and the constant benchmark by which all participants are measured. Achieving this standard – by real governance quality, real continuous monitoring, real regulatory engagement, and professional advisory support to navigate complexity – is the basis for a fund management business that can operate its Singapore operations with confidence in its regulatory environment and with commercial credibility in the international asset management community.
