Existing RFMC regime may be repealed if the new framework is approved

The Monetary Authority of Singapore (MAS) has launched a public consultation aimed at streamlining the regulatory framework for fund managers, proposing a significant shake-up in the industry.

Under the proposed framework, the existing Registered Fund Management Companies (RFMC) regime will be repealed. Operational RFMCs will have the opportunity to transition into Licensed Fund Management Companies (LFMCs) upon application.

The RFMC regime was initially introduced in 2012, following the repeal of a previous regime for Exempt Fund Managers (EFMs), to help facilitate the transition of EFMs into a fully regulated regime.

During that transition, EFMs had the option to apply for either an RFMC or LFMC status. RFMCs share similar admission criteria and business conduct requirements with LFMCs, catering exclusively to accredited or institutional investors (A/I LFMCs).

The distinguishing feature of RFMCs has been their lighter requirements in terms of regulatory reporting frequency and granularity, in light of restrictions placed on their assets under management and customer count.

Singapore’s financial regulator explained the rationale behind the proposed changes, noting that “since 2012, the business models and risk profiles of RFMCs and A/I LFMCs have increasingly converged, making the regulatory distinction between the two less meaningful.”

In practice, many RFMCs have chosen to upgrade and transition into A/I LFMCs as their businesses expand. Additionally, the majority of new entrants seeking to engage in fund management in Singapore now tend to apply for A/I LFMC status rather than RFMC, according to MAS observations.

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This move by MAS to change the fund management regulatory framework reflects the evolving nature of the industry and the need to adapt regulations accordingly to ensure a cohesive and effective oversight system.

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