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Singapore VCFM License Application Service

VCFM 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.

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 the VCFM license In Singapore

As clear from above VCFM is the smallest and the simplest license where the main condition is That the fund invest at least 80% of committed capital (excluding fees and expenses) in specified products that are directly issued by an unlisted business venture that has been incorporated for no more than ten years at the time of initial investment (“qualifying investments”). Any follow-on investment in such qualifying investments will remain as qualifying, even if the portfolio company has been incorporated for more than ten years at the point of follow-on investment.

So basically, VCFM License is for funds that invest in startups that are unlisted.

For the avoidance of doubt, a VCFM’s funds can only make investments (non-qualifying or otherwise) in unlisted assets. The funds cannot invest in listed securities or initial public offerings. However, this does not preclude a VCFM’s funds from holding listed securities in portfolio companies, provided that the fund had acquired these securities prior to their listing. VCFMs are not expected to reclassify an investment from qualifying to non-qualifying if its portfolio company’s securities become listed.

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

What are the applicable requirements?

Minimum Base Capital

VCFM is not required to have any minimum base capital requirement.

Risk Based Capital

VCFM 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

VCFM 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

A VCFM 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 VCFMs 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

VCFM are not mandated to have their own independent compliance department. A VCFM 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

VCFM is subject to an annual audit and also internal audit.

Professional Indemnity Insurance (PII)

It is not mandatory for VCFMs 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

4000 SGD at the time of registration.

Staffing Requirements

A VCFM 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
Full time 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: For a VCFM license there is no requirement for specific qualifications and experience for the representative. Min 2

What is the processing time required?

Expected processing time is 2-3 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 VCFM must annually file form 25A – Annual declaration by VCFM within 1 month from the end of the financial year. VCFM are not mandated to file auditors report or financial statement with MAS.

How Singapore Compliance can help

From the above, it should be clear to you that applying for VCFM 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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