What is a Collective Investment Scheme (CIS)?
Collective Investment Schemes are arrangements in respect of any underlying investments or assets which satisfy the following elements:
- Participants have no day-to-day control over management of the underlying investments.
- Either or both characteristics are present:
- The manager, or someone acting on the manager’s behalf, manages the underlying Investments as a whole;
- Participants pool their contributions, and pool the profits/income from which payments are to be made.
- (Purported) purpose or effect of the arrangement is to enable participants to participate in or receive profits/income arising from the investments.
In Singapore, Collective Investment Schemes can take various forms, such as unit trusts, exchange-traded funds (ETFs), real estate investment trusts (REITs), and private equity funds. Part 1, Section 2 of the Securities and Futures Act (SFA) outlines the definition of CIS.
In particular, CIS’ comprise a large portion of the publicly traded market today, with reference to ETFs. Investing in a CIS offers investors the benefit of having access to expert, professional Investment managers. These managers are able to leverage off the scale of investors in their CIS to carry out efficient portfolio management activities. However, investors must consider risks such as market fluctuations, management quality, liquidity limitations, and high fees. Therefore, it’s crucial to evaluate costs, fund performance, and the potential impact of interest rates and inflation. Proper research can help mitigate risks and maximize returns.
Classification of Collective Investment Schemes in Singapore
In Singapore, MAS categorizes CIS’ into four regimes: Authorized, Recognized, Exempted, and Restricted. Managers offer units in an Authorised or Recognised CIS via a Monetary Authority of Singapore (MAS)-registered prospectus and product highlights sheet. The Offers and Prospectuses Electronic Repository and Access site (OPERA) effects the Authorisation/Recognition. In addition, the regimes provide for specific categorisation of the investor types for such CIS’. Authorized (Constituted in Singapore) and Recognized (Constituted outside Singapore) schemes primarily target retail investors. Exempted and Restricted CIS’ cater to Accredited and Institutional investors.
For MAS to Recognise a Foreign CIS in Singapore, the laws and practices of the CIS’ jurisdiction must offer protections for investors in Singapore. These protections must be equivalent to those Authorized CIS’ provide’. Furthermore, the CIS’ manager must hold a licence or fall under regulation in its primary place of business. The CIS must also appoint a representative in Singapore. These conditions ensure that only CIS’ with transparent information and strong risk management practices are accessible to the public.
Exempted and Restricted Collective Investment Schemes
Exempted Offers and Restricted schemes target Accredited and Institutional Investors. These investors possess the financial acumen and ability to handle higher investment risks. As such, these types of CIS face lighter regulatory oversight. Exempted Offers need not undergo the standard authorization/recognition process or register a prospectus. These include:
- small offers, where the total amount raised is S$5 million or less within a 12-month period;
- private placements made to no more than 50 persons in 12 months; and
- offers targeted to Accredited/Institutional Investors as aforementioned.
However, these offers must comply with certain conditions. These include restrictions on advertising and the requirement to disclose the nature of the offer, as per Subdivision 4 of Division 2, Part XIII of the Securities and Futures Act (SFA).
Restricted CIS’ are only available to “relevant persons” (as defined in section 305(5) of the SFA). They are also available to investors committing at least S$200,000 per transaction. These are exempt from Authorization, Recognition, and prospectus registration requirements, subject to certain conditions. These CIS must notify the MAS via the CISNet portal to be included in the restricted schemes list. For inclusion, the offer must contain an information memorandum. The CIS’ manager must also hold a licence and meet fit and proper criteria.
Restricted Non-Capital Market Product CIS do not invest in capital markets products. These need not have a licensed manager, and thus do not appear in the restricted schemes list. If these CIS have a licensed manager, the manager can add them to the restricted schemes list by submitting the required online notification. Additionally, to maintain their exemption status, all restricted CIS must submit an annual declaration every 12 months.
Why Choose Curia Regis?
At Curia Regis, we understand the complexities surrounding the offers of Collective Investment Schemes and their reporting requirements. This also includes providing data to the MAS via the relevant Asset Management surveys that you must populate from time to time. We can support you with registering your CIS in the appropriate manner. We also assist your regulated business with providing accurate and timely responses to such surveys, as part of our Ongoing Compliance support function.
Feel free to reach out to us here or email us at admin@curiaregis.com for personalized assistance. We’ll help you navigate these complexities with ease.
