Over the last decade, the Singapore government has taken a proactive approach to make it become an important center of fund management in Asia. The economic ascendancy, along with an increase in investments from Western countries, has made this form of business more popular. More importantly, the ideal tax environment in the country also reinforced its stronghold in this region. This guide will show you how to start a fund management company in Singapore.
Overview of the Fund Management Industry in Singapore
After the financial crisis in 2008, the Singapore government took many new measures to improve the regulatory framework for its fund management industry. In 2010, the Money Authority of Singapore or MAS released a proposal and the conclusion of the consultation to restructure this field. The new regulatory regime took effect in August 2012.
According to the revised framework, there will be 3 types of fund management companies (FMCs), depending on the nature and size of the businesses. These include:
A fund management company should meet the minimum competency requirements for all key personnel. Also, it needs to satisfy the Money Authority of Singapore that its employees, representatives, directors, and shareholders are proper and fit.
The company should have at least two directors who have more than five years of relevant experience. Nominee directors won’t be counted. The CEO of retail FMCs should have at least ten years of experience.
Retail FMCs are required to hire at least 3 full-time representatives who are living in Singapore. Those are people who implement regulated activities like portfolio allocation and construction, advisory and research, client servicing or business marketing and development.
At times, all fund management companies must meet the base thresholds of capital before incorporating such business. The specific amounts are as follows:
All fund management companies must ensure that they have sufficient compliance arrangements which commensurate with the complexity, nature and scale of operation. The directors and CEO are directly responsible for these regulatory and compliance matters. Specific requirements for each type of company are as follows:
Fund management companies should ensure sufficient framework for risk management to identify, monitor, and address risks related to customers’ assets which they are managing. This function should have sufficient oversight by the senior management and board of directors. Appropriate metrics and tools must be developed or acquired to ensure timely and precise assessment and tracking of risks associated with customers’ assets. Also, all reports, procedures, and policies relating to risk management must be recorded and maintained properly.
All fund management companies in Singapore are subjected to reasonable internal audit, which might be implemented by an internal function or a third-party service provider. If the chosen auditors are deemed to be inappropriate, the Monetary Authority of Singapore might request the companies to appoint others until they meet audit requirements. In most cases, this will depend on the complexity, nature, and scale of the business.