29 May 2019

On 30 April 2019, the Monetary Authority of Singapore (“MAS”) released the following consultation papers to seek public feedback on the operational and the anti-money laundering and countering the financing of terrorism (“AML/CFT”) requirements for the upcoming variable capital companies (“VCC”) framework:

  1. Consultation Paper on the Proposed Framework for Variable Capital Companies Part 2 (“Consultation Paper on Regulations”); and 
  2. Consultation Paper on the Proposed Notice on Prevention of Money Laundering and Countering the Financing of Terrorism for Variable Capital Companies (“AML/CFT Consultation Paper”).

Comments must be submitted to MAS by 30 May 2019.


The Variable Capital Companies Act 2018 (“VCC Act”) was passed by Parliament on 1 October 2018 but has yet to come into force. The VCC Act is a new legal framework for the creation of VCCs in Singapore, a new type of corporate entity tailor-made for investment funds. A VCC may be set up as a single standalone fund or as an umbrella VCC structure with multiple sub-funds that may have different investment objectives and investors, with segregation of assets and liabilities at the sub-fund level.

The Registrar of Companies, the Accounting and Corporate Regulatory Authority (“ACRA”), will be the Registrar for VCCs (“Registrar”). ACRA will administer the VCC Act and its subsidiary legislation while AML/CFT obligations of VCCs will come under the purview of MAS.

MAS sought public comments on its key policies on the VCC framework from 23 March 2017 to 24 April 2017 in the “Consultation Paper on the Proposed Framework for Singapore Variable Capital Companies” (“2017 Policy Consultation Paper”). MAS has taken into account the feedback received pursuant to the consultation exercise when drafting the VCC Act as well as the proposals in the current Consultation Paper on Regulations and AML/CFT Consultation Paper.

Consultation Paper on Regulations

The Consultation Paper on Regulations seeks feedback on the draft regulations to be issued under the VCC Act, and draft changes to the Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations 2005 (“SFR(CIS)”) as well as the Code on Collective Investment Schemes (“CIS Code”). Key proposals in the Consultation Paper on Regulations are discussed below.

Draft regulations under the VCC Act

  •  Fit and proper criteria of directors of VCC: The VCC Act requires a VCC to appoint only “fit and proper” persons as the VCC’s directors. In determining whether a person applying to be a director or proposed director of a VCC is “fit and proper”, MAS proposes applying a set of criteria that take into account the applicant’s previous conduct and compliance history as a director of a VCC, financial institution (“FI”) or overseas institution.
  • Re-domiciliation: A foreign corporate entity, defined in the VCC Act as a body corporate that is incorporated outside Singapore which comprises one or more collective investment schemes (“CISs”), will be allowed to re-domicile as a VCC in Singapore through a transfer of registration process. The Consultation Paper on Regulations contains a set of draft Regulations that set out the proposed requirements for re-domiciliation of a foreign corporate entity. 
  • Prescribed accounting standards: The draft Variable Capital Companies (Prescribed Accounting Standards) Regulations 2019 set out the accounting standards to be used by the VCCs to prepare their financial statements.
  • Filing procedure: The procedure for the filing of documents by a VCC largely mirrors that for companies under the CA, with necessary modifications to cater to the unique features of VCCs.

Draft changes to the SFR(CIS)

  • Custodians of VCCs or sub-funds: The duties of the custodian are to be aligned with those of a trustee approved under section 289 of the Securities and Futures Act (“SFA”) (“Approved Trustee”), except the obligation to safeguard the rights and interests of the VCC shareholders. 
  • VCC constitution and contractual agreements: Proposed requirements on the VCC constitution and contractual agreements between a VCC and its directors, manager and custodian are intended to mirror the current requirements for trust deeds of unit trusts. 
  • Prospectus disclosure requirements: Among other things, a VCC or a sub-fund of a VCC will be required to disclose the risk of cross-cell contagion to shareholders of the VCC.

Draft changes to the CIS Code

  •  Additional responsibilities and independence requirements: MAS proposes to extend certain existing responsibilities and independence requirements relating to Approved Trustees and managers of CISs that are constituted in Singapore and authorised by MAS under section 286(1) of the SFA, to the VCC, its directors and custodians (where applicable). 
  • Cross-cell contagion risk: MAS proposes to allow an authorised VCC or an authorised sub-fund of a VCC to invest in assets located in a jurisdiction that does not have a cellular structure only after taking reasonable measures to mitigate cross-cell contagion risk.

AML/CFT Consultation Paper

MAS proposes to introduce an AML/CFT Notice to VCCs (“VCC AML/CFT Notice”), a draft of which is set out in the AML/CFT Consultation Paper. The VCC AML/CFT Notice reflects the policy outcomes from the earlier 2017 Policy Public Consultation and imposes AML/CFT requirements on VCCs which are similar to those imposed on existing MAS-regulated entities, with some key adaptations discussed below.

Engagement of an eligible FI

To prevent the abuse of a VCC as an investment vehicle for unlawful purposes, MAS will require a VCC to engage a FI which will be prescribed in the Notice (“eligible FI”) to conduct the necessary checks and perform the customer due diligence (“CDD”) measures set out in the VCC AML/CFT Notice in order for the VCC to comply with the relevant parts of the VCC AML/CFT Notice. A list of FIs which a VCC may engage to perform its AML/CFT duties is set out in Table 1 of the AML/CFT Consultation Paper. They consist of FIs which are regulated and supervised by MAS for AML/CFT purposes (for example, a bank licensed in Singapore acting as a fund distributor).

Obligations that should not be delegated to eligible FIs

MAS proposes that a VCC should not delegate the requirements set out in the following paragraphs of the VCC AML/CFT Notice to an eligible FI:

  • Paragraph 3 on “Underlying Principles” which sets out the broad principles which a VCC should adhere to in the conduct of its operations and business activities in order to prevent money laundering and terrorism financing;  
  • Paragraph 4 on “Eligible Financial Institution” which requires a VCC to engage an eligible FI;  
  • Paragraph 10 on “Reliance on Third Parties” which requires a VCC to ensure that, when the eligible FI engaged by the VCC is relying on a third party to perform the CDD measures set out in the VCC AML/CFT Notice, the eligible FI complies with the requirements set out in this Paragraph.

A VCC is required to put in place internal policies and procedures, and appropriate compliance, audit and training procedures, similar to other FIs regulated by MAS for AML/CFT purposes. A VCC should also ensure that its directors and employees, if any, are adequately trained on its AML/CFT obligations. MAS will provide additional clarification in this area in the guidelines to the VCC AML/CFT Notice.

Reference materials

The following materials are available on the MAS website www.mas.gov.sg:

Consultation Paper on Regulations

AML/CFT Consultation Paper 


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