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RFMC License Application Service

When is licensing or registration required?

If a company raises and manages third party investors’ funds in a collective investment scheme, or invest them in a segregated accounts into capital markets products, such as equities, fixed income and financial derivatives, it is conducting fund management and would need to be licensed or registered to do so.

On the other hand, if a company is managing proprietary monies, or monies belonging to a single party or group of related entities, it is likely to be able to be exempt from licensing or registration. Please see the next section on licensing exemptions for additional reference.

Depending on the size of the company’s expected assets under management and target clientele, it can operate as a:

  • Registered Fund Management Company (RFMC), which can have up to 30 accredited and institutional investors, and S$250 million of assets under management (AUM), or
  • Capital markets services (CMS) license holder to conduct fund management (licensed fund management company, or LFMC). An LFMC has no restriction on the number of investors or AUM and can be further categorized into:

Retail LFMC

Carries on business in fund management with all types of investors, including retail investors.

Accredited/Institutional LFMC (A/I LFMC)

Carries on business in fund management with accredited and institutional investors only.

Venture Capital Fund Manager (VCFM)

Manages venture capital funds only. Such funds have to meet certain fund eligibility criteria such as being mainly invested in start-ups.

What is RFMC license In Singapore

As clear from above RFMC is generally a smaller and a simpler license where the assets under management needs to be below 250 Million SGD and they can have maximum 30 accredited institutional investors (Out of which maximum 15 can be fund or limited funds).

If your entity falls in this category, then this is the license relevant for you.

What is an Accredited Investor?

Accredited Investors are assumed to be better informed, better able to access resources to protect their own interests, and therefore, would require less regulatory protection. Investors who agree to be treated as Accredited Investors therefore forgo the benefit of certain regulatory safeguards. When the bank deals with Accredited Investors, banks are exempt from complying with certain regulatory requirements of the Financial Advisers Act (FAA), the Securities and Futures Act (SFA) and related regulations that are meant to provide regulatory safeguards to retail customers.

Criteria to qualify as an Accredited Investor

For individuals to qualify to become Accredited Investors, they have to meet at least 1 of the following 3 criteria:

  • Income in the preceding 12 months is not less than SGD300,000 (or its equivalent in a foreign currency)
  • Net personal assets exceeding SGD2 million (or its equivalent in a foreign currency) in value, of which the net value of the investor's primary place of residence can only contribute up to SGD1 million
  • Net Financial Assets exceeding SGD1 million (or its equivalent in a foreign currency) in value

If this criterion is satisfied, then such a person can be considered as an Accredited Investor.

What are the applicable requirements?

Minimum Base Capital

Every RFMC is required to have a minimum base capital of 250,000 SGD. Please note minimum base capital does not refer to the share capital of the legal entity. This is the amount you should always have in your accounts as a solvent company. So generally, it is recommended to have enough buffer in the capital. RFMC are always required to assess the capital buffer and take necessary steps to bring it in line with a legal requirement.

Risk Based Capital

RFMC are not subject to risk based capital, so there is no need to maintain an additional buffer. The requirement of risk-based capital applies only to the LFMCs.

Office Requirement

RFMC should be Singapore incorporated company and have a permanent physical office in Singapore. The office should be dedicated, secure and accessible only to the FMC’s directors and staff. A unit is serviced office is acceptable however, co-working spaces do not qualify as an office for FMC as it is not considered dedicated and accessible only to the staff.

AML / CFT Requirements

An FMC shall comply with the requirements on antimoney laundering and countering the financing of terrorism [“AML/CFT”] requirements, as set out in the Notice to Capital Markets Service Licensees and Exempt Persons on Prevention of Money Laundering and Countering the Financing of Terrorism [SFA04-N02].

Reporting of Misconduct

All LFMCs shall comply with the misconduct reporting requirements set out in the Notice on Reporting of Misconduct of Representatives by Holders of CMS Licence and Exempt Financial institutions [SFA04-N11].

Compliance Function

RFMCs are not mandated to have their own independent compliance department. An RFMC should ensure that it has adequate compliance arrangements commensurate with the scale, nature and complexity of its operations. This may take the form of an independent compliance function, compliance support from overseas affiliates and/or use of external service providers that meet the requirements set out previously.

Audit and Internal Audit

RFMC are subject to annual MAS audit and also internal audit.

Professional Indemnity Insurance (PII)

It is not mandatory for RFMCs to have any PII though MAS encourages to take one. So you need to consider your specific situation and decide accordingly.

License fees to be paid to MAS

1000 SGD at the time of registration.

Staffing Requirements

An RFMC is required to appoint an adequate number of directors, relevant professionals and representatives as set out in the table below. It must also appoint a Chief Executive Officer [“CEO”]. There is no restriction on the CEO to take on multiple appointments within the firm if there are synergies, e.g. the CEO can also be appointed as Executive Director, relevant professional and representative. The individual would then need to meet the requirements in respect of each appointment.

Criteria

Requirement

Number of Directors Min 2
Minimum years of relevant experience for Directors 5 years
Executive Director At least 1 out of 2 Directors
Number of relevant professionals residing in Singapore: Relevant professionals are employed full-time in the day-to-day operations of the company. They may include the executive directors, CEO and representatives of the FMC. Min 2
Number of representatives residing in Singapore: Representatives are required to meet applicable minimum entry and examination requirements as set out in the “Notice on Minimum Entry and Examination Requirements for Representatives of Holders of Capital Markets Services licence and Exempt Financial Institutions under the SFA [SFA04-N09]” and any other relevant notices issued by MAS. Min 2 (5 years relevant experience is required)

What is the processing time required?

The expected processing time is 4 months to review and process an application if the business model is straightforward, the applicant meets the relevant admission criteria fully, and the application is complete and clear. For more complex cases, or cases where information is assessed to be incomplete or inaccurate, MAS will need a longer time to review the application.

It is therefore important that you use a professional firm like ours to process your application with MAS. Please ensure that your company’s application is complete, correct and accompanied by the requisite supporting documents.

Annual Compliance you will be subjected to?

Every RFMC must annually file form 25A – Annual declaration by RFMC within 1 month from the end of the financial year and form 25B – Auditors report and financial statements within 5 months from the end of the financial year.

How Singapore Compliance can help

From the above it should be clear to you that applying for RFMC license is not an easy task. Often times MAS requires additional clarifications and if the documents provided are not clear then the process can get delayed resulting in a Significant loss of time.

When you engage us we bring our expertise in this sector and ensure your application is submitted correctly with all relevant details. Moreover, we provide all the below services. So when you engage us you don’t have to worry about other services related to Compliance and AML / CFT.

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