A fund management company should ensure that its shareholders, directors, representatives, employees, and the company itself qualify as ‘fit and proper.’ This follows the Guidelines on Fit and Proper Criteria issued by MAS [FSG-G01].

The revised guideline provides additional information on how fund management companies should implement the Guidelines on Fit and Proper Criteria issued by MAS [FSG-G01].

How?
The fund management company should perform sufficient due diligence checks on its potential representatives and employees.
These checks could include:

(a)Verification of individual’s credentials, work experience and disciplinary record (if any) from their previous employer
(b) Where representatives are hired based on their track record, FMCs should validate that track record before making the appointment. This may include back-testing the investment strategy using historical data.

Collective relevant experience was not required for all the asset classes, markets that the fund management company manages.
The wording of the guideline in this area is rather persuasive and not authoritative.
‘The board of directors of the fund management companies should collectively have experience in portfolio management. This includes support functions such as risk management, operations and compliance’.

It does not expressly extend to include proposed investment strategies of the fund management company.

The onus of possessing the collective relevant experience is on the board of directors.

The requirement remains the same: at least one Executive Director must have portfolio management experience in the asset classes or markets the company intends to invest in. 

To ascertain a fund management license, the CEO, directors, and relevant professionals must have sufficient experience relevant to the fund manager’s activities.

The CEO, senior management, and directors overseeing investment activities must now collectively cover all asset classes, markets, and strategies the company invests in. They must also be able to manage the associated risks properly.

This also extends to proposed investment strategies of the fund management company.
With the revised guidelines, collective relevant experience can also be drawn from senior management. It is no longer limited to only CEOs and directors.

The requirement remains the same: at least one Executive Director must have portfolio management experience in the asset classes or markets the company intends to invest in.

The responsibility of assessing the stability of the fund management company is on the board of directors and management team.

The previous guideline did not expressly address passive shareholders, except that key management personnel needed to hold majority shares in the fund management company.

The responsibility of assessing the stability of the fund management company now expressly extends to the CEO. This applies regardless of whether they are also directors.

It also asks companies to minimise shareholdings held by passive shareholders, whether direct or indirect. This applies to shareholders not involved in the business, or who lack relevant fund management experience. The majority shareholding requirement by key management team is still a focal point here.

The scope of responsibility was only limited to directors and senior management.

Previous versions of the guidelines did not expressly require a clear line of escalation. However, the Individual Accountability Guidelines already covered this. Companies needed to develop and maintain procedures to ensure they closely monitored identified risks.

A fund management company should also recognise that these risks depend on the nature and size of its operations, and the nature of assets it manages.

The updated guideline extends this responsibility to the CEO as well, not just directors and senior management.

Procedures should establish a clear escalation process. This ensures that management is kept informed of risks in a timely manner.

Fund management companies also need to demonstrate they have put measures in place to address risks, depending on the size and nature of the assets they manage.

In the revised guideline, a fund management company should establish clear policies and procedures to handle customer complaints and feedback effectively and promptly.

Companies should clearly identify senior management members responsible for handling customer complaints. They should also document the escalation and review process, and communicate it to all employees.

There were no express provisions for this in the previous version of the guidelines. This, however, is accorded for in the Individual Accountability Guidelines.

However, the guidelines state that a fund management company should satisfy MAS that its shareholders, directors, representatives, employees, and the company itself are fit and proper. This is in accordance with the Guidelines on Fit and Proper Criteria issued by MAS [FSG-G01].

The updated Guidelines expressly require an appropriate governance structure. This structure should enable the FMC to monitor individuals who act on its behalf. Monitoring should take place on an ongoing basis.

This includes CEO, directors, representatives and employees.

The fund management company should put in place documented systems and controls. These should demonstrate oversight of these individuals’ activities, backed by a disciplinary action framework to hold individuals accountable.

The updated Guidelines extends to include digital assets and guidelines for its disclosure.

A fund management company investing in digital assets should minimally disclose:
a) the heightened price, liquidity, and volatility risks associated with digital assets;
b) The risks associated with the use of intermediaries such as trading platforms and custodians. Fund Management Companies must segregate client assets, store most of them in cold wallets, and use hot wallets only for liquidity and operational needs. Disclosure of the custody arrangements should include the jurisdiction in which the custodians are suitably licensed, registered or authorised; and
c) any other regulatory and legal risks that are associated with investments in digital assets.