The Monetary Authority of Singapore (MAS) is targeting to repeal the Registered Fund Management Companies (RFMC) regime by August 1, 2024. This article will provide an overview and lay out the steps fund managers will need to take to navigate the transition to the new format.
Please note: This article is intended as general information only and is not legal advice. Please consult with your legal advisor for specific recommendations to ensure your compliance.
Background
The Singapore Registered Fund Management Companies (“RFMC”) framework is a regulatory regime introduced by the Monetary Authority of Singapore (“MAS”) in 2012 to oversee and regulate the operations of fund management companies in Singapore. It aims to promote Singapore as a hub for fund management activities and attract more fund managers to set up operations in the country.
On 24 October 2023, the MAS issued a consultation paper to seek feedback on the proposed arrangements for existing Registered Fund Management Companies (“RFMCs”) that intend to continue operating fund management businesses following the repeal of the regulatory regime for RFMCs.
The consultation closed on 31 December 2023 and MAS has carefully considered the feedback received, which largely centered around the transitional arrangements for existing RFMCs, the limit on managed assets post-licensing, and the timelines associated with the forthcoming repeal.
In April 2024, the MAS announced the upcoming repeal of the regulatory regime for RFMCs and is consolidating this licensing framework under a single tier of fund management companies and institutional investors (A/I LFMCs). This move is aiming to:
• Simplify regulations, making it easier for fund managers to understand and comply with requirements.
• Enhance risk management practices across the Singapore fund management industry.
• Attract more significant players to Singapore’s fund management ecosystem.
Timeline of events leading up to the repeal of the RFMC regime
Important Details to Keep in Mind
• The RFMC regime will be repealed effective August 1, 2024.
• Existing RFMCs wishing to carry on fund management activities after the repeal must apply to become an A/I LFMC via the prescribed application Form 1AR (the “Form”) between 1 April 2024 to 30 June 2024.
• Post submission of Form 1AR, MAS may require further clarifications and might request additional supporting documents such as the contractual agreement for the AUM reported.
• The MAS will inform all applicants of their decision within one month.
• For any changes in representatives of transiting RFMCs, Form 23A must be submitted before 15 July 2024. Such representatives of RFMCs will become appointed individuals on the date that the RFMC is licensed.
• Changes in notification requirements to MAS before and after the grant of CMS license in the week of 29 July 2024 (the “Licencing Date”).
• Successful applicants will receive their new CMS licenses by the end of July 2024. Licensees need to access MASNET immediately after the grant and must give MASNET access to relevant company personnel.
• Upon obtaining the CMS license, All transiting RFMCs will have to submit the first quarterly filing for Q3 2024.
• Annual Forms submission for the transiting RFMCs will differ depending on their financial year-end.
What it Means to Existing RFMCs
For fund managers now operating under the RFMC regime, this repeal introduces several changes:
• Licensing and Increased Capital Requirements: All fund managers will now need to meet the requirements set for full fund management companies (A/I FMCs). This involves stricter capital requirements and may require different operational capabilities.
• Compliance Burdens: For some fund managers, there may be an increase in compliance costs and operational demands as former RFMCs align with the broader A/I FMC regulatory standards.
• Business Impact: Managers will need to assess how these changes affect their business models, particularly concerning fund structures and investor relations.
• Changes for Exempt Representatives: Any currently exempt representatives will become appointed representatives upon licensing.
Meeting the Criteria for Successful Transition
For RFMCs transitioning to the full A/I FMC license, specific criteria must be met per MAS:
Active Managed Assets: Firms must have managed assets attributable to third-party investors in the six months immediately preceding the submission of Form 1AR.
Timely Submission: All firms must submit Form 1AR within the applicable deadlines to avoid penalties and ensure the continuation of operations.
Documentation and Support: All related documentation must be maintained. If and when requested, firms must provide all supporting documents to MAS to demonstrate transparency and adherence to regulatory requirements.
Operational Continuity: During the application and transition process, RFMCs must maintain their business operations as usual and comply with all existing regulations until MAS officially confirms the transition. This continuity ensures no disruption in service to clients and helps provide stability in the firm’s operations.
Managing the AUM Threshold
The existing cap on assets under management (AUM) will remain at S$250 million by default. Firms wanting to manage a larger AUM must apply separately through MAS for an exception. (MAS is expected to provide clarification and a specific form to facilitate this process.)
Transitioning to the New Framework
Transitioning to the consolidated A/I FMC regime will require attention to deadlines and new requirements. Here are practical steps fund managers should consider:
1. Review current operations to identify areas requiring attention and action: First, it’s wise to evaluate your current operational, compliance, and risk management frameworks against the enhanced A/I FMC requirements to see what needs to change to ensure your compliance.
2. Develop a compliance roadmap: Outline a detailed plan to meet the new requirements, including timelines and responsibilities.
3. Check in with MAS as needed: Since many fund managers will be going through this regime change, it is wise to proactively communicate with MAS if you have any questions to ensure you get clarification where necessary.
4. Update internal policies: Revise internal policies, procedures, and controls to align with the new regulatory expectations.
5. Communicate with investors: To ensure transparency, it is recommended that your investors be updated about the transition before and after the process is complete.
For further questions, please refer to the FAQ page on MAS website
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