A Guide to the RFMC License: How to Apply and Why You Need It

As its GDP is growing at a fast rate, Singapore has turned into a leading financial hub that systematically attracts fund managers and investors across different echelons of the globe. The Registered Fund Management Company (RFMC) license offers a simplified route into Singapore for small and medium sized fund managers under a regulated framework. This article discusses its importance to the RFMC license, how it’s helpful for fund managers and how to apply.

What is an RFMC License?

A fund management firm license issued by the Monetary Authority of Singapore (MAS) for the purposes of managing funds on behalf of qualified investors ('defined in s 3(1) of the Capital Markets Act (Cap 110) or the Securities Industry Act (Cap 289)', respectively) for the capital of the fund within the limits set out in the relevant Act (i.e Securities Industry Act 289 or Capital Markets Act 110). The RFMC license is both tailored for small fund managers, having AUM of less than SGD 250 million and less than 30 qualified investors out of which, no more than 15 are investment funds.

A licensing option for boutique or startup fund managers who wish to operate within Singapore’s regulatory framework without the need to have full Capital Markets Services (CMS) license requirements.

RFMC License Key Features

1. Limited Asset and Investor Base: Small, niche fund managers can manage up to SGD 250 million in assets for up to SGD 250 million of qualified investors, making it ideally suited for RFMC licensed firms.
2. Regulatory Flexibility: Unlike a CMS license, the RFMC license offers more control, less regulatory obligations and yet ensures that funds are managed responsibly and transparently.
3. Access to Qualified Investors: Working with accredited or institutional investors (which are defined as sophisticated and able to manage investment risks) limits RFMCs to specific investors.
4. Lower Compliance Requirements: Compared to CMS license firms, RFMC license firms still need to meet compliance standards, but do so under fewer requirements, making it easier for smaller firms to meet regulatory demands.

Why You Need an RFMC License

The RFMC license offers a number of important benefits for fund managers who may wish to enter Singapore’s asset management industry. Here’s why obtaining the RFMC license can be advantageous:

1. Regulatory Legitimacy

Firms that operate without a license in Singapore’s regulated financial sector are illegal, and violators can get a fine, or even have operations shut down entirely. With its RFMC license, fund managers can legally manage funds in Singapore and give them the regulatory legitimacy to be operated confidently and transparently. This legitimacy is needed to woo clients and establish trust in a regulated business where there are strict rules regarding everything, especially advertising.

2. Ability to Join a Growing Financial Hub

It is no secret that Singapore has become the leading Asia destination for asset management in the past years due to its strategic location, a stable economy, and a good regulatory environment. What the RFMC license provides is an opening into this buzzing market for small and medium sized fund managers, which wouldn’t otherwise be the case with a full CMS license.

3. Flexibility for Smaller Firms

It allows smaller fund management firms to concentrate on asset management without the additional compliance costs which are required for bigger firms. This allows boutique fund managers to function and be efficient as a boutique, allocating resources to client service and portfolio management, not compliance.

4. Accredited Investor and Attractive for Investor

RFMC license requires fund managers to serve only qualified investors, such as accredited persons and institutions. More knowledgeable investors, however, will be the ones to these investors, and that will enable fund managers to provide tailored strategies and high value services. This type of approach is ideal for fund managers to target the construction of exclusive client relationships with sophisticated investors.

5. Pathway to Growth

The RFMC license offers a stepping stone towards fund managers wishing to grow. A CMS license gives a firm more room to do business when it grows and its assets under management expands, allowing it to offer more services and work with more investors. The RFMC license provides firms a scalable route to build their fund management business in Singapore with the ability to scale up without overwhelming regulatory requirements.

Information About How to Apply For RFMC License

Certain preparations in very detailed documentation, meets all the regulatory criteria and application to MAS are required to apply for an RFMC license. Below is an overview of the key steps in the RFMC application process:

Step 1: Documents Required

To apply, the firm must undergo extensive documentation to prove the firm meets regulatory standards. Key documents include:

• Business Plan: A look at the fund’s structure, investment strategy, targeted investor, and forecasted growth.
• Compliance Policies: Prevent regulatory non adherence through established compliance practices (eg. Anti Money laundering (AML) and Countering the Financing of Terrorism (CFT).
• Organizational Structure: Important information about the firm’s governance, including who the directors are, shareholders, key personnel, and relevant experience and qualifications of each.
• Risk Management Framework: How the firm will describe how it will identify, assess and manage possible risks within the firm's operations and investment.

Step 2: Meet Fit and Proper Criteria

All RFMC applicants must meet ‘fit and proper’ criteria, that is to say, whether the firm’s directors and key personnel are of integrity, competent and financially sound. It guarantees that the lead team of the fund has the abilities and the standing to function responsibly in Singapore’s regulatory environment.

Step 3: Submit the Application to MAS

When the documents are put together, the application is filed with the Monetary Authority of Singapore. MAS will review the application to determine if all requirements are met and if so, will approve it – or may require additional information. After the review, MAS assesses the firm’s compliance framework, business model as well as the risk management capability to determine if the firm is suitable for RFMC licensing.

Step 4: MAS Review and Approval

MAS reviews thoroughly, during which they can interview key personnel or assess the firm’s controls and compliance procedures at the firm. The RFMC license is granted if MAS finds that the firm meets all regulatory requirements and the firm is authorized to lawfully manage assets within the confines.

Step 5: Post-Licensing Compliance

It’s just the first step of getting the RFMC license. Once licensed, RFMCs must adhere to ongoing compliance requirements, including:

• Regular Audits: Internal audits are carried out to establish compliance with MAS standards and also to identify the other areas for improvement.
• Client Reporting: Filing transparent, timely reports with investors concerning fund performatrv(the amount of money left each year after they take out fees) and investment riskiness.
• Annual Compliance Reporting: The firm submitting reports to MAS on an annual basis, reporting on the firm's compliance status, risk management activity and any material change to the operations.

Conclusion

The opportunity to pick up an RFMC license is a great opportunity for an asset manager who wants to participate in the competitive asset management industry in Singapore. The RFMC license — which provides a streamlined regulatory path for smaller firms to legally manage assets and serve sophisticated investors — saves time and money. The RFMC license is the perfect solution for boutique or startup fund managers giving them access to Singapore’s financial markets and flexibility and scalability.

Obtaining the RFMC license is a strategic first step for firms that are considering entry into Singapore’s asset management sector. Fund managers can win the trust of investors, eliminate regulatory risks and set themselves up for growth in one of Asia’s leading financial hubs by following MAS requirements and building their compliance framework. Whether you want long term stability or expansion into a bigger CMS license, the RFMC license is what you need to be successful in Singapore’s booming asset management space.