The Monetary Authority of Singapore is seeking to enhance the regulatory framework of its fund management regime, in a bid to attract international players and investors to its shores.

The Monetary Authority of Singapore is seeking to enhance the regulatory framework of its fund management regime, in a bid to attract international players and investors to its shores.

The reforms will mean strengthening the supervision of the fund management industry in Singapore and raising the internal controls of fund managers. The new regime will be implemented in mid-2012.

Laven Partners, the global consultant, said that the implementation of the
new regime will allow Singaporean fund managers to align their processes
with international practices standards, and raise the quality of new
entrants. "We believe that regulatory compliance can be approached as a
positive component of business. The new regulatory framework in
Singapore will give managers the opportunity to improve operational
processes and governance and, as a consequence, their marketability," said Laven. Laven said it had met with MAS officials last month and discussed the new rules set for implementation.

Under the existing regime, there have been two types of companies conducting fund management activities in Singapore; those holding a capital market services license, or those which have an exemption from the rule. Fund management companies who notify the MAS that they are servicing less than 30 qualified investors, may be exempted from licensing if they meet the criteria. FMCs dealing with more than 30 qualified investors, are, however, currently required to hold a CMS license.

Under the proposed regulatory regime for fund managers, there will be three new categories of fund management companies:

1. Registered Fund Management Companies:

FMCs whose assets under management do not exceed S$250 million and who serve no more than 30 qualified investors, of which no more than 15 are funds, will be categorised as registered fund management companies. The underlying investors of such funds will nevertheless have to be accredited investors.

2. Licensed Accredited/ Institutional Investors Fund Management companies:

Under this definition, fund managers have no restrictions in AUM, however they can only service accredited and/or institutional investors. To the extent that the licensed AI FMCs manage a fund, the underlying investors will equally have to be accredited investors and/or institutional investors.

3. Licensed Retail Fund Management Companies:

Licensed retail FMCs have no restrictions in AUM or type of clientele.

Until now, only holders of a CMS license have been required to abide by the business conduct requirements relating to recordkeeping rules, providing of statements to clients, disclosure agreements and restrictions on financial promotions.

In future, all FMCs will be required to meet the conduct of business requirements as set out in the Securities and Futures Act. In addition, the MAS proposes to impose additional business conduct requirements relating to custody, fund administration and compliance. Other changes will be made to custodial arrangements, compliance arrangements, a formalised risk management framework, capital adequacy and competence of staff.

Further rule changes

Separately, the city-state has been making further tweaks to make its fund industry attractive to new entrants and investors. This week, the MAS said that the non-binding revised Code of Corporate Governance will allow more institutional investors to be represented on a company's board of directors.

It has also been looking at how to clarify over-the-counter derivatives clearing and reporting. 

A recent survey by BNP Paribas said that Singapore, Hong Kong and Taiwan, are the most attractive destinations for global asset managers’ UCITS distribution in Asia.