Singapore To Enhance Fund Management Regulation

by Mary Swire, LawAndTax-News.com, Hong Kong

03 May 2010

The Monetary Authority of Singapore (MAS) is reviewing the regulatory regime for financial intermediaries conducting fund management activities, as well as the exemption regime for financial intermediaries engaged in leveraged foreign exchange trading.

The review is aimed at ensuring that the regulatory regime keeps pace with industry and regulatory developments globally, formalizing existing industry best practices, as well as enhancing regulatory oversight over the respective industries. The proposed enhancements also seek to raise the quality and standard of individuals in the industry, to foster long-term sustainable growth of the fund management industry.

The proposals are said to represent an evolution of the existing regulatory regime for the fund management industry. Fund management companies (FMCs) whose activities are limited in scale and impact may continue to operate under a notification regime. Such ‘notified FMCs’ will be those with assets under management of not more than SGD250m (USD182m), and who serve not more than 30 qualified investors, of which not more than 15 are funds.

The MAS is of the view that the clients of notified FMCs, comprising only qualified investors, have the ability, as well as the resources, to conduct the necessary due diligence prior to dealing with the FMC, and to safeguard their own interests.

FMCs who serve retail investors and/or manage or advise on a larger portfolio of assets will have to be licensed. Licensed FMCs who manage retail unit trust funds and collective investment schemes will come under this category. The MAS also intends to require all FMCs to meet business conduct as well as capital requirements.

Currently, all holders of a fund management licence are required to appoint at least two directors with experience in the financial services industry. MAS intends to maintain these requirements and apply them to all FMCs. MAS also expects that the chief executive officer (CEO), directors and representatives of all FMCs should meet MAS’s fit and proper requirements, as is the current requirement for all financial institutions in Singapore.

In addition, to ensure that FMCs have the relevant expertise and experience to carry on business in fund management, MAS proposes that all FMCs will be required to, at all times, employ at least two full-time individuals who both have at least five years of relevant experience and reside in Singapore. One of these individuals must be appointed as the CEO and executive director of the FMC.

Under the proposed business conduct requirements, FMCs will need to maintain customers' assets with independent custodians, ensuring segregation of duties between the functions of fund management and fund administration. FMCs will also need to have compliance arrangements which are commensurate with the size and scale of the FMCs' business.

It is emphasized that the MAS maintains an open and consultative approach with the industry, and remains committed to building Singapore as a fund management and alternative investment hub. In developing its proposals, the MAS has considered the views and comments from the public, investors, market practitioners and industry associations.

A consultation paper has been issued by the MAS to seek further comments from the public on the proposed changes to the regulatory regime. The consultation period will end on May 31, 2010.

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