The RFMC to LFMC transition addresses the disparity between Registered Fund Management Companies (“RFMC”) and Capital Market Services License (“CMS”) holders for Fund Management (“LFMC”). It consolidates the two regimes into one. This removes the different regulatory mechanisms, timelines, requirements, and filing channels. The market can now understand its obligations under one overarching regulatory framework.
RFMC to LFMC Transition: Timelines
To provide clarity and certainty on the RFMC to LFMC transition, MAS has outlined the following timelines and information:
- Repeal of RFMC Regime: The repeal of the RFMC regime will come into effect on 1st August 2024.
- Transition Period: RFMCs intending to continue providing regulated fund management services have a transition period from 1st April 2024 to 30th June 2024. During this window, they can apply to be an Accredited and Institutional-Investor LFMC by completing and submitting Form 1AR (“Form”).During this period, MAS may request additional information. RFMCs should reply on a timely basis to facilitate a smooth transition.
- MAS will inform RFMCs of the outcome of their application within a month of submission. MAS expects to issue CMS licences to all successful applicants by end July 2024.
- Once MAS licenses an RFMC, it will transition its exempt representatives to appointed representatives on the same date as the licensing approval.
- MAS will publish the names of these appointed representatives on its Register of Representatives. This uses information RFMCs provide in their Form 23A notifications to MAS.
- RFMCs must ensure all representative information is up to date, as per the latest Form 23A notification to MAS. They are responsible for the accuracy of representative information on the MAS Register, and should promptly update any changes before licensing.
- Prior to licensing, RFMCs must ensure that all representatives meet the requirements. These are set out in the Notice on Minimum Entry and Examination Requirements for Representatives of Holders of Capital Markets Services Licence and Exempt Financial Institutions (SFA 04-N09).
Consideration factors in reviewing Form 1AR applications
MAS will approve an RFMC’s application to be an A/I LFMC if the RFMC:
(a) has managed assets attributable to third-party investors in the six months immediately preceding submission of the Form to MAS. This does not apply if the RFMC has been registered for six months or less as at the submission date;
(b) submits the Form within the stipulated timeline; and
(c) satisfactorily furnishes supporting documents to MAS, if requested.
Continuity of operations and applicable requirements during and after application
During the RFMC to LFMC transition application process for licensing as LFMCs, RFMCs can operate without interruptions. RFMCs must still adhere to their existing regulatory obligations, such as filing notifications and annual declarations. RFMCs should acquaint themselves with the additional regulatory obligations for LFMCs before obtaining their license. Once licensed, LFMCs must immediately comply with their updated regulatory requirements. This includes obtaining prior approvals for relevant business changes and submitting quarterly regulatory filings.
Unsuccessful Form 1AR applications
Under existing legislation, RFMCs will cease to be registered if they have not conducted fund management activity for a continuous six-month period before submitting the Form. They can no longer carry on any regulated fund management activity.
Communication with investors
RFMC, should always prioritize the interests of their investors and maintain transparency in their operations. Considering this, RFMCs should assess whether informing their investors about the repeal of the RFMC regime will benefit said investors.
To reiterate an earlier point, RFMCs that fail to secure licensing before the repeal date will lose their regulatory authorisation to conduct fund management activities.
Specific Restrictions and Requirements on A/I LFMCs Transitioned from RFMCs
Clarification on Asset Under Management (AUM) Cap
MAS has noted that most RFMCs operate with assets well below the AUM Cap of S$250 million. They typically manage smaller asset pools, with simpler internal controls and staffing structures. The AUM Cap acts as a protective measure until MAS determines that the FMC is prepared to manage larger asset volumes. MAS will conduct a review if an RFMC seeks to lift the AUM Cap after obtaining its license.
MAS will consider several factors. These include the FMC’s regulatory compliance record, internal controls, and risk management and compliance arrangements. MAS also considers the stability of its Board, CEO, and senior management team. MAS will also consider the extent and nature of changes to the FMC’s business model and investment strategy.
MAS will not impose the AUM Cap on applicants that apply to be A/I LFMCs via the regular application process using Form 1A. This process already accounts for the applicant’s likely ability to handle such growth.
Legislative Amendments and Implementation Plan
Transition support
RFMCs needing assistance should consider engaging professional compliance service providers or legal advisors with A/I LFMC expertise. They should also promptly enhance internal policies and processes to meet additional requirements, such as heightened reporting frequency.
Treatment of ongoing RFMC applications
As of 1st of January 2024, MAS ceased accepting new RFMC applications. However, MAS will continue to assess RFMC applications received before this date. If MAS approves an application, the applicant must submit the Form. MAS will then license it as an A/I LFMC with the AUM Cap, even if the initial application was for RFMC status.
Overall, the RFMC to LFMC transition marks a significant step towards greater clarity for Singapore’s fund management landscape. However, such change requires a difficult balancing act. MAS must avoid setting too high a benchmark for prospective fund managers setting up in Singapore. At the same time, it must foster a conducive environment for fund managers to thrive while maintaining high regulatory standards.
RFMC to LFMC Transition: How We Can Help
Our dedicated team based in Singapore is instrumental in guiding organizations through the transition from RFMCs to A/I LFMCs. We can assist you with the transition, as well as with the additional regulatory requirements you will face as an A/I LFMC.
We offer comprehensive regulatory compliance support. This includes tailored assistance with policies and procedures, ongoing compliance support, and regular internal audits. This helps align your business model and regulatory requirements with MAS’s expectations, while ensuring you remain commercially sound..
Reach out to us today at Admin@curiaregis.com to discover how we can help you through this transition, or to understand how this change will affect you.
