SETTING UP A FUND MANAGEMENT

COMPANY IN SINGAPORE
Industry Overview

• Approximately 600 managers managing various asset classes in retail

and private funds.

• Under 100 managers manage retail moneys. The rest manage moneys on
a private basis.

• As at end 2012, approximately US$1.3 trillion total assets under

management from Singapore.

• 80% of AUM sourced offshore to Singapore.

• 70% of AUM invested into Asia Pacific region.

• About 3,300 investment professionals involved in front office activities i.e.

portfolio managers, analysts, traders.

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Industry Overview

• Hedge Fund AUM estimated at US$63 billion.

• Post financial crisis, increased focus on strengthening financial system to

ensure stability and resilience.

• Increased regulation and more rigorous supervision.

• Enhanced staffing, competency, capital and business conduct requirements.

• Creation of a new Investment Intermediaries Division in 2011 having

specific oversight over fund managers.

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Admission Criteria
Registered Fund Licensed Accredited / Licensed Retail Fund
Management Companies Institutional Fund Management
[“Registered FMCs”] Management Companies
Companies [“Licensed [“Licensed Retail
AI FMCs”] FMCs”]

Type of • Submission of • Licence application • Licence application

approval registration form to MAS process process

• MAS will review forms • MAS' prior approval • MAS' prior approval
needed needed
• If registration is successful,
MAS will publish • Licence required if
Registered FMC’s name on more than S$250 AUM
the MAS’ online directory

• AUM less than S$250m

Restriction of New Managers’ activities prior to registration with the MAS

New Managers cannot enter into any investment management agreement or accept client moneys until name 
published on website
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Admission Criteria

Registered FMCs Licensed AI FMCs Licensed Retail FMCs

Restrictions • Clients - not more than 30 • Clients - only • No restrictions on

qualified investors, of which accredited and AUM or clientele
not more than 15 can be institutional investors
investment pools or funds. only
(Can have unlimited
number of investors in
funds but all must be
accredited investors or
institutional investors)

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Admission Criteria

Criteria Registered FMCs Licensed AI FMCs Licensed Retail FMCs

Corporate • Nil • Nil • Shareholder (or

Track Record group) to have
corporate track
record of fund
management for at
least 5 years

• Global AUM of at
least S$1 billion

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Admission Criteria

Criteria Registered FMCs Licensed AI FMCs Licensed Retail FMCs

Number of • At least 2 directors (at least 1 resident)

Directors
• Nominee directors not counted for 2-director requirement

• Experience in the financial services industry recommended (including managerial

experience or experience in a supervisory capacity)

• 1 director must be resident and appointed as CEO

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Admission Criteria

Criteria Registered FMCs Licensed AI FMCs Licensed Retail FMCs

Number of • At least 2 full-time resident representatives • At least 3 full-time

Representatives resident
• Essentially anyone performing a front office role i.e. representatives
portfolio management, research, trading and
execution and marketing

* Representatives must spend substantially all their business time in front office activity. COO who
does some marketing would probably not count.

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Admission Criteria

Criteria Registered FMCs Licensed AI FMCs Licensed Retail FMCs

Relevant • At least 2 full-time resident individuals, each of • At least 3 full-time

Experience / whom has a minimum of 5 years of relevant resident individuals,
Individual Track experience in fund management value chain each of whom has a
Record minimum of 5 years
• Anyone with experience in fund management value of relevant
chain including both front office and back office, experience
portfolio management, research and advisory,
trading and execution, risk management, • CEO to have a
operations. minimum of 10 years
of experience in the
Risk • One person with relevant operational experience financial services
Management and not involved in a front office role to undertake industry
risk management i.e. the person in charge of risk

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Admission Criteria

Criteria Registered FMCs Licensed AI FMCs Licensed Retail FMCs

• management to be independent of portfolio

management (if part of a group, role can be
performed by an affiliate i.e. parent company)

CMFAS Exams • Nil • Nil • Required

(for
representatives)

Professional • Strongly encouraged, but not mandatory • Required

Indemnity
Insurance (“PII”)

Base Capital*
• S$250,000 • S$500,000 to
S$1,000,000

* Broadly equivalent to shareholders equity

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Ongoing Requirements

Criteria Registered FMCs Licensed AI FMCs Licensed Retail FMCs

(Ongoing) Risk- • Nil • Subject to risk-based capital requirements

Based Capital
Requirements • Highest of:
► 5% of average annual gross income up to
S$10 million for last 3 years
► 2% of average annual gross income above
S$10 million for last 3 years
► S$100,000

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Ongoing Requirements

Criteria Registered FMCs Licensed AI FMCs Licensed Retail FMCs

Compliance • Compliance personnel • Independent from front • Independent and

Arrangements required but does not office dedicated compliance
have to be dedicated or function based in
independent • Independent and Singapore needed
dedicated compliance
officer needed if AUM
close to or above S$1
billion

* If part of a group, compliance function for Registered FMC's and Licensed AI FMC's can be
performed by person in head office if head office has an independent and dedicated compliance
team and adequate resources are allocated
* Compliance personnel can perform complementary functions e.g. legal

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Ongoing Requirements

Criteria Registered FMCs Licensed AI FMCs Licensed Retail FMCs

Custodial • To place customer's monies and assets with a custodian

Arrangements
• Custodian to be licensed, registered or authorised (to perform the custodial
function) in the jurisdiction where the monies or assets are being held

• Should have third party valuation

Independent • However can perform in-house provided there is independence and
Valuation segregation of front office functions from valuation functions

* Exemptions for PE/VC managers where assets are not listed

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Ongoing Requirements

(1) Compliance & Operations

CEO & Directors must:

• Put in place compliance arrangements

• Identify, address and monitor risks

• Ensure adequate internal audit with annual audit plan

• Ensure effective controls and segregation of duties to mitigate conflicts

(2) Implementation of a Formalised Risk Management Framework and

Additional Duties

• Suited to size and scale of FMC's operations

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Ongoing Requirements

• Effectively identify, manage and monitor risks associated with customer

assets

• Take into account principles set out in MAS Guidelines on Risk

Management Practices

(3) Requirement to file audited accounts within 5 months of financial year

end

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Ongoing Requirements

Requirement for an Auditors Report

• Auditors to report on FMC's compliance with relevant regulations.

Real Estate Exemption

• Exemption from oversight for managers of “Immovable Assets”

Real estate managers may potentially use this exemption

Limitations of exemption.

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Marketing Investment Funds in Singapore

• Marketing to Institutional Investors

• Private Placement Safe Harbour

 Approaching up to 50 persons over a 12 month period

• Marketing to Accredited Investors and Relevant Persons

 Notification Filings in CISNet for Foreign Funds

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Possible Fund Structures

Standalone
Investors

Fund Singapore Unit Trust

Investments

Master Feeders (Equity & Hedge)

Feeder 1 Feeder 2 (Offshore/Onshore Domicile)

Offshore Domicile or Singapore Domicile

Master (Option 1)

Singapore Domicile Trading Vehicle

(Option 2)

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 Disclaimer:

The content of this presentation is general in nature

and is not legal advice.

© Copyright 2014 Rajah & Tann LLP. Not to be reproduced or disseminated without
permission. All rights reserved.
 For more information, please contact:

Arnold Tan
Tel: (65) 6232 0701
Email: arnold.tan@rajahtann.com

Website: http://www.rajahtann.com

© Copyright 2014 Rajah & Tann LLP. Not to be reproduced or disseminated without
permission. All rights reserved.