On 6 April 2023, the Monetary Authority of Singapore (MAS) issued updated Guidelines on Licensing, Registration and Conduct of Business for Fund Management Companies [SFA 04-G05] (FMC Guidelines). The FMC Guidelines set out the minimum requirements for the licensing or registration of fund management companies (FMCs)and the conduct of their business.
This article briefly discusses the key changes in the latest version of the FMC Guidelines.
FMCs have always been required to ensure that they and each of their shareholders, directors, representative and employees meet the fit and proper criteria set out in MAS’s Guidelines on Fit and Proper Criteria [FSG-G01]. The updated FMC Guidelines now specifically require FMCs to carry out adequate pre-employment due diligence checks on their representatives and employees, including performing reference checks with previous employers and verifying investment strategy track records, where applicable.
FMCs have also always been required to ensure that their CEO, directors and relevant professionals have sufficient experience which is relevant to their fund management activities. The updated FMC Guidelines expand on this requirement further by specifying that the CEO, senior management and directors with oversight of an FMC’s investment activities must collectively have relevant experience to invest in, and manage the risks associated with, its intended asset classes, markets and investment strategies.
Under the FMC Guidelines, an FMC’s in-house compliance officer must have relevant experience and be familiar with the rules and regulations applicable to the FMC. The updated FMC Guidelines now also require in-house compliance officers to undergo regular and appropriate training on such rules and regulations.
In addition to developing a risk management framework to identify, address and monitor risks associated with customer assets under its management, an FMC is now required to show that it has implemented measures to manage such risks. The measures must be appropriate to the nature and size of the FMC’s operations and the assets it manages.
The updated FMC Guidelines now also provide that the CEO, directors and senior management are ultimately responsible for oversight of the FMC’s risk management framework and that there should be clear lines of escalation to keep the management informed of risk exposures in a continual and timely manner.
Previously, the FMC Guidelines only set out the requirements for terminating a fund. The updated FMC Guidelines introduce requirements for an FMC’s cessation of business, including:
The updated FMC Guidelines also introduce complaints handling requirements, whereby FMCs must:
Finally, the updated FMC Guidelines now require an FMC to establish an appropriate governance mechanism to effectively monitor the activities of persons who act on its behalf, including its CEO, directors, representatives and employees (collectively, FMC Representatives). The governance mechanism should include:
MAS updated the FMC Guidelines to introduce new requirements relating to due diligence and supervision of FMC representatives, specific competency criteria for CEOs / directors / senior management, in-house compliance officer training, risk management measures and oversight, cessation of business processes and complaints handling procedures.
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Disclaimer: This article is for general information only and does not constitute legal advice.