[Q] Singapore Capital Markets License (CMS License) Introduction and Eligibility Requirements

Singapore is one of Asia's leading asset management and fund centres. For firms planning to manage funds in Singapore, whether they need a Capital Markets Services Licence (CMS Licence) from the Monetary Authority of Singapore (MAS) is one of the first questions to settle when designing the fund structure.  Note that Singapore's fund management regulatory framework has changed in recent years: the Registered Fund Management Company (RFMC) regime was abolished from 1 August 2024. This article answers the questions clients most often ask about fund management CMS Licences, based on the Securities and Futures Act (SFA), MAS's current fund management framework and other public information.

Professional services you may be interested in:

◎ [SG] Capital Markets Services (CMS) Licence Application

FAQs

Q: What is a Singapore CMS Licence?

A: A CMS Licence (Capital Markets Services Licence) is regulated by MAS under the SFA. Under the current SFA, regulated capital markets activities include:

– Dealing in capital markets products;

– Advising on corporate finance;

– Fund management;

– Real estate investment trust management;

– Product financing;

– Providing credit rating services;

– Providing custodial services.

A CMS Licence is therefore not a single-activity licence. A business must assess which regulated activities it actually carries on to decide whether it needs a CMS Licence and for what scope. For private funds, family investment platforms and asset managers, the activity most often involved is fund management.

Q: Does a fund management company always need a CMS Licence?

A: Generally, a company carrying on fund management in Singapore within the SFA definition needs the relevant CMS Licence, unless it qualifies for a specific exemption under the SFA or related regulations.

Q: What is an LFMC?

A: An LFMC (Licensed Fund Management Company) is a fund management company holding a fund management CMS Licence. Depending on the funds managed and the type of investors, the market usually distinguishes between:

– A/I LFMC: a licensed fund management company serving accredited and institutional investors (including professional investors), usually under the A/I fund management framework. This is the model most often used by Singapore private funds, private equity funds, hedge funds and family investment structures.

– Retail LFMC: a licensed fund management company serving retail investors who are not accredited or institutional investors, usually subject to significantly stricter requirements.

Before applying for a fund management CMS Licence, you should therefore be clear whether the fund will mainly serve professional/accredited investors or retail investors.

Q: What is a VCFM, and how does it differ from an ordinary LFMC?

A: A VCFM (Venture Capital Fund Manager) is the regulatory framework for venture capital fund managers. It applies to qualifying managers that manage venture capital funds only. Compared with an ordinary LFMC, the VCFM framework is designed around the investment model of venture capital funds, so some capital and regulatory requirements differ.

Q: What are the eligibility requirements for a CMS Licence?

A: When deciding whether to grant a CMS Licence, MAS generally looks at staffing, capital and internal controls. The specific requirements are those published on the MAS website. Taking a fund management licence as an example, the general requirements are:

Staffing

– The applicant, its shareholders and directors must be fit and proper, with relevant experience and a good track record;

– At least 2 directors, who should not be nominee directors, with at least 1 resident in Singapore;

– The proposed CEO must have at least 10 years of relevant experience and be resident in Singapore;

– At least 2 representatives, working full-time in Singapore with at least 5 years of relevant experience;

Capital

– The company must maintain the minimum base capital required under the SFA, for example SGD 500,000 for an A/I LFMC and SGD 1,000,000 for a Retail LFMC;

Internal controls

– Robust risk management and compliance systems, including AML/CFT procedures, a risk framework and a privacy policy.

Besides these general requirements, applicants must prepare a business model or plan, projections and the related risks.

Requirements also differ between licence types under the CMS Licence, so we recommend discussing the licence type with us early to prepare the application smoothly.

Q: What are a Singapore fund's ongoing compliance obligations, and what is the tax rate?

A: For ongoing compliance obligations, please see Summary of FAQs on Existing VCCs in Singapore and Summary of FAQs on Singapore VCC Fund Taxation. Singapore's standard corporate income tax rate is 17%, and funds can apply for tax incentives such as Section 13O or Section 13U (under which qualifying fund investment income may be tax-exempt).

This article is compiled and updated by the EStar ACRA-registered CSP team and tax team. If you have any other questions, please leave us a message or contact our team.

We will keep adding new FAQs and replies to answer your questions.