The Monetary Authority of Singapore (MAS) intends to repeal the Registered Fund Management Companies (RFMCs) regime to streamline fund management regulations. Ahead of this substantial change, the MAS has launched a public consultation seeking feedback on the proposed transition arrangements for existing RFMCs.

The MAS introduced the RFMC regime in 2012. While RFMCs operate under an exemption to fund management licensing under Singapore’s securities regulations, they have similar admission criteria and business conduct requirements to licensed fund management companies that only serve accredited or institutional investors (A/I LFMCs).

The key differences between A/I LFMCs and RFMCs are that the latter are restricted to serving only up to 30 qualified investors and having assets under management (AUM) of not more than SGD 250 million. The upside is that RFMCs have fewer reporting obligations and lower application and annual fees payable.

In a public release on 24 October 2023, the MAS stated that 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 upgraded to become A/I LFMCs as their business grew, and most new entrants carrying out business in fund management tend to apply to be A/I LFMCs instead of RFMCs.

KEY TRANSITIONAL ARRANGEMENTS

Applying to Be an A/I LFMC

Existing RFMCs that wish to carry on fund management after the RFMC regime is repealed must apply for a capital markets services license (CMS license) for fund management prior to the repeal. More information on the timeline and mode of submission of the application will be provided in due course. There will not be any application fee payable to the MAS to transition to an A/I LFMC.

The MAS will respond to all applications from RFMCs within one month of application. Successful applicants will be issued a CMS license upon the repeal of the RFMC regime. The MAS will have discretion to impose additional license conditions if there are known concerns with an RFMC’s regulatory history.

RFMCs that do not apply for a CMS license by the stipulated deadline will be considered to have opted to cease their fund management business on the repeal of the RFMC regime.

Restrictions on Transitioned A/I LFMCs

The MAS will continue to restrict RFMCs that have transitioned to A/I LFMCs (Transitioned A/I LFMCs) to an AUM of SGD 250 million as a CMS license condition, as such Transitioned A/I LFMCs’ internal controls and arrangements tend toward managing smaller AUMs. The Transitioned A/I LFMCs may subsequently engage with the MAS to review and lift this restriction if they plan to increase their AUM.

There will be no cap on the number of qualified investors managed by the Transitioned A/I LFMCs.

Reporting Requirements

Transitioned A/I LFMCs are required to comply with existing RFMC reporting requirements prior to the repeal of the RFMC regime (i.e., the reporting requirements are based on the repeal date rather than the date of transition).

Cessation of New RFMC Applications

The MAS will cease accepting RFMC applications as of 1 January 2024 to minimize the number of transition applications from RFMCs to A/I LFMCs.

NEXT STEPS

The repeal of the RFMC regime is a significant change to Singapore’s fund management regulatory landscape and is indicative of the MAS’s perception of a change in the industry, where the “lighter-touch” RFMC regime is seen as obsolete.

RFMCs that have plans to surpass the existing qualified investor or AUM restrictions may use this opportunity to accelerate the process of obtaining a CMS license. Prior to this proposed transition plan, a change from RFMC to A/I LFMC involved a fresh application for a CMS license, which the MAS expects to take at least six months to review.

On the other hand, RFMCs with no plans to grow may instead be disincentivized to remain in the industry given the higher fees and increased reporting requirements as an A/I LFMC.

Those who would like to provide responses to the MAS on the proposed repeal of the RFMC regime can do so here. Submissions will be accepted through 31 December 2023.

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