SINGAPORE Law and Practice Contributed by: Woon Hum Tan, Shook Lin & Bok LLP
come from Singapore, South-East Asia and North Asia, with growing traction in South Asia and Europe. 3.2 Legal Structures Used by Managers Where the alternative fund managers are based in Sin - gapore, they will take the form of a local private lim - ited company. These are typically newly incorporated companies and wholly owned or majority-owned by the founders, sponsors or parent entity. Employees of the local alternative fund managers are paid monthly salaries, performance bonuses and incentive payouts, which may be correlated to the performance of the funds they manage (including some form of carry, long-term incentives, employee stock options or employee share plans). These may be structured using offshore vehicles like corporations or limited partnerships. As Singapore remains a competi - tive market for fund managers and talent, individual personnel compensation and incentive arrangements play a significant part in attracting, retaining and incentivising talent. 3.3 Regulatory Regime for Managers CMS Licence for Fund Management Any entity that manages funds in Singapore must hold one of the three licences as set out below, unless oth - erwise statutorily exempted: • a CMS licence for fund management for retail investors (Retail LFMC); • a CMS licence for fund management for AIs and IIs only (AIFMC); or • a CMS licence for VC fund management for AIs and IIs only (VCFMC). Requirements for the Licensed FM The fund manager must be a Singapore incorporated company and have a permanent physical office in Singapore. The office must be dedicated, secure and accessible only to the fund manager’s directors and personnel. Retail LFMCs can carry on business in fund manage - ment with all types of investors. AIFMCs and VCFMCs can only carry on business in fund management with AIs and IIs. In addition, VCFMCs can only carry on business in fund management in respect of VC funds
that satisfy various VC criteria as prescribed by the MAS. To qualify for licensing, the fund manager must con - duct substantive fund management activity in Sin - gapore such as portfolio management, investment research or trade execution. The fund manager should satisfy the MAS that it, its shareholders, directors, representatives and employ - ees are fit and proper, in accordance with the Guide - lines on Fit and Proper Criteria issued by MAS (FSG- G01). The fund manager must perform adequate due diligence checks and refresh such checks regularly. The CEO, directors and relevant professionals of the fund manager must have adequate relevant experi - ence (ie, their experience should be relevant to the fund management activities of the fund manager). The CEO and directors must collectively have experience in both portfolio management and support functions such as risk management, operations and compli - ance. The CEO, senior management and directors are responsible for the oversight of the fund manager’s investment activities and must be able to effectively manage the risks associated with the asset classes, markets and strategies. There must be at least two directors, with at least one executive director residing in Singapore. There must be at least two full-time professionals (at least three for Retail LFMCs) residing in Singapore, each of whom has at least five years of relevant experience. The CEO must have at least five years of relevant experience (at least ten years for Retail LFMCs). The fund manager must at all times meet the base capital thresholds (eg, SGD250,000 for AIFMCs) and risk-based capital thresholds prescribed by the MAS. The fund manager is expected to maintain an addi - tional capital buffer, over and above the minimum requirement. The fund manager must have in place compliance arrangements that are commensurate with the nature, scale and complexity of its fund management busi - ness. It must put in place a risk management frame - work to identify, address and monitor the risks asso-
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