On 24 October 2023, the Monetary Authority of Singapore (“MAS”) published a consultation paper on its proposal to streamline the regulatory framework for fund managers. Specifically, the existing registered fund management companies (“RFMCs”) regime will be repealed, and existing RFMCs that wish to continue operations should apply to be approved as licensed fund management companies (“LFMCs”). The consultation paper seeks feedback on the proposed transitional arrangements for existing RFMCs that intend to continue operating fund management businesses following the repeal. The consultation closes on 31 December 2023.
Set out below is an overview of MAS’ proposal and the areas on which MAS is seeking feedback.
Background and rationale for repeal
The RFMC regime was introduced in 2012, following the repeal of an earlier regime for exempt fund managers (“EFMs”) to facilitate the transition of EFMs into a fully regulated regime. EFMs in existence at that time had the option to apply to become either an RFMC or a LFMC. RFMCs have similar admission criteria and business conduct requirements as LFMCs that serve only accredited or institutional investors (“A/I LFMCs”). However, RFMCs are subject to lighter requirements in terms of the frequency and granularity of regulatory reporting, given the limits placed on their assets under management and number of customers.
Under the RFMC regime, RFMCs are restricted to carrying out fund management for not more than 30 accredited or institutional investors and managing not more than S$250 million of assets.
MAS explains that since 2012, the business models and risk profiles of RFMCs and A/I LFMCs have increasingly converged, making the regulatory distinction between the two less meaningful. Many RFMCs have also upgraded to become A/I LFMCs as their businesses grew, and most new entrants seeking to conduct fund management in Singapore tend to apply to be A/I LFMCs rather than RFMCs. MAS states that the RFMC regime has served its purpose of transitioning EFMs, and that it is timely to simplify the regulatory regime and harmonise requirements for fund managers by repealing the RFMC regime.
MAS states that it will conduct a briefing for RFMCs to address any uncertainty over the transitional arrangements prior to the repeal.
Proposed transitional arrangements for existing RFMCs
MAS proposes a simplified process for RFMCs that wish to apply to become A/I LFMCs. Existing RFMCs can continue operating as usual during the transition process.
Process for existing RFMCs to become A/I LFMCs
MAS seeks comments on the proposed process for existing RFMCs to become A/I LFMCs.
RFMCs will need to submit a form during a prescribed application window to be granted a capital markets services (“CMS”) licence, setting out their assets under management and confirming their ability to comply with the regulatory requirements for A/I LFMCs. MAS will grant a CMS licence to RFMCs that have carried out business in fund management activities in the six months immediately preceding the submission of the form, and have submitted the form within the stipulated timeline. The form is annexed to the consultation paper.
MAS will respond to all applications from RFMCs within a month and issue CMS licences to successful applicants upon the repeal of the RFMC regime. The exempt representatives of applicants issued a CMS licence will be transitioned to appointed representatives. Where there are known concerns with an RFMC’s regulatory history or the fitness and propriety of the RFMC, its directors, shareholders or staff, MAS will review its licensing status and may impose additional restrictions or conditions.
RFMCs applying to become A/I LFMCs during the prescribed application window will not have to pay any application fee for the corporate entity, nor any fee for the notification of their existing representatives. Upon being licensed, the prevailing CMS annual corporate licence fee and representative fees will apply on a pro-rated basis to such A/I LFMCs and their representatives.
RFMCs that do not submit applications by the stipulated deadline will be considered to have opted to cease fund management activities upon the repeal of the RFMC regime. MAS will provide further information on the application process, e.g. the timeline and mode of submission of the form.
Specific restrictions and requirements on A/I LFMCs transitioned from RFMCs
MAS seeks comments on the specific restrictions and requirements for A/I LFMCs transitioned from RFMCs.
MAS will retain the limit of S$250 million on the managed assets of RFMCs that transition to become A/I LFMCs. After the transition, they can apply to MAS to uplift the limit on managed assets, if they have plans to grow their managed assets. There will be no cap on the number of investors or funds managed.
These A/I LFMCs will have to comply with the reporting requirements applicable to typical A/I LFMCs. They will have to seek MAS’ prior approval for certain changes, such as their shareholders and key appointment holders.
These A/I LFMCs will be subject to the following reporting requirements that span the repeal date:
- Changes in particulars that occur before the repeal date: The fund management companies (“FMC”) must comply with existing RFMC requirements by submitting Form 23A within 14 days of the change, even if the 14-day period crosses the repeal date. For changes in particulars occurring after the repeal date, requirements applicable to A/I LFMCs will apply, which include seeking prior approval for director appointments. In any event, MAS reviews all notified changes, including submissions for changes occurring before the repeal date. MAS may direct the FMC to remove the individuals who do not meet eligibility criteria or who are not fit and proper.
- Submission of annual regulatory returns for financial year ending before repeal date: The FMC must comply with existing RFMC requirements by submitting (i) an annual declaration via Form 25A within one month from financial year end, and (ii) an auditor’s report via Form 25B no later than five months from financial year end, even if the respective submission periods cross the repeal date. Having submitted Forms 25A and 25B, the FMC does not have to additionally submit regulatory returns required of an A/I LFMC for the same financial year already covered by the two forms.
Where an RFMC has been issued written directions and/or have specific conditions imposed on its regulatory status due to its specific circumstances, these directions and conditions will continue to apply even after the RFMC becomes an A/I LFMCs. Where the directions issued by MAS relate to the remediation of deficiencies, the A/I LFMC will be required to complete the remediation within the timeframe set by MAS.
Legislative amendments and implementation plan
MAS will implement the repeal of the RFMC regime after considering industry feedback and finalising the legislative amendments. The proposed legislative amendments for the repeal is annexed to the consultation paper.
To minimise the number of RFMC applications by the time of the repeal, MAS will stop accepting new RFMC applications from 1 January 2024. From 1 January 2024 onwards, applicants seeking to conduct fund management should apply for a CMS licence for fund management, subject to admission and ongoing requirements.
MAS states that it will continue to review any RFMC application that remains outstanding after 1 January 2024, with a view to registering all successful applicants before the repeal date.
The following materials are available on the MAS website www.mas.gov.sg: