29 april 2010 the singapore branch of the alternative investment management association ldquo aima rdquo , the industry trade association for hedge funds, is currently in the process of engaging its singapore members, in response to the latest monetary authority of singapore ldquo mas rdquo consultation paper on the proposal to regulate the fund management companies. The latest mas consultation paper sets out the proposed regulatory framework governing fund management companies ldquo fmcs rdquo . There are three proposed categories of fmcs under the new regulatory regime: notified fmcs ndash fmcs whose assets under management ldquo aum rdquo are not more than s$250 million and who serve not more than 30 qualified investors licensed a/i fmcs ndash licensed fmcs who serve only accredited and/or institutional investors and licensed retail fmcs ndash licensed fmcs who serve retail i.e. This proposed 3 tier regime for fund managers will affect local hedge fund managers. Currently, local hedge fund managers operate under the exempt fund manager ldquo efm rdquo framework. The mas have called for responses to the paper by 31 may 2010 and, following consultation with its members, aima singapore will be submitting comments to the mas. Michael coleman, the chairman of the singapore branch of aima, commented: ldquo we are pleased to note that the latest consultation paper has seen mas considering many of the views and comments that aima had raised in earlier dialogue sessions.

Rdquo michael added: ldquo our member managers will be impacted by the proposed changes particularly in the areas of capitalization and executive staffing. We are happy to see that mas has, with the notified fmc category, recognized the needs of start up and smaller managers not to be overburdened by regulatory costs. Rdquo michael also welcomes the transitional arrangement proposed by mas: ldquo our members had expressed concerns around the need for and likely shape of a transitional regime.

The announcement provides clarity on this issue and it is anticipated there will be an aggregate of 18 months rsquo time for our members to meet the new requirements. This will help to mitigate any potential major disruption to the continued operation of our members. Rdquo 29 april 2010 the singapore branch of the alternative investment management association ldquo aima rdquo , the industry trade association for hedge funds, is currently in the process of engaging its singapore members, in response to the latest monetary authority of singapore ldquo mas rdquo consultation paper on the proposal to regulate the fund management companies. Rdquo the passport working group australia, korea, new zealand, the philippines, singapore and thailand released a consultation paper to seek views from the public on the details of the proposed arrangements. This followed the signing of a statement of intent on the passport by representatives from australia, korea, new zealand and singapore in september 2013, committing to jointly issuing such a paper. Interested parties were invited to make a submission on the consultation paper via the relevant economy: subsequent consultation on the rules and operational arrangements commenced in february 2015.

In a consultation paper yesterday, mas formalised the rules for exempt fund managers efms , creating a category of 'notified fmcs' fund management companies. This category will continue to operate under a notification regime, but will be subject to certain conditions. The major change in that category is a requirement for a base capital of at least $250,0 at all times. There is also now a requirement for a minimum of two individuals each with at least five years of relevant experience and at least two full time resident representatives. Mas said in its paper: 'the authority understands the industry's concern over increases in start up costs.

Nevertheless, the authority's view is that maintaining a base capital requirement is consistent with sound business practice and improves the viability of new fmcs by acting as a buffer for unexpected costs, especially during adverse market conditions.' mas said there are no restrictions on the use of the base capital for investments in assets, which can be cash, investments in the firm's own funds or fixed assets such as office equipment. 'however, given the need to maintain base capital at or above the mandated level at all times, it may be prudent for fmcs to consider maintaining an additional capital buffer usually in cash , to allow for asset depreciation, drawdown of funds to meet operating or other expenses and/or losses.' the need for two experienced professionals was earlier 'strongly encouraged' but not formally required. The consultation document had been widely anticipated as hedge funds and private equity firms have come under increased scrutiny among regulators in the wake of the financial crisis. More hedge funds have based themselves in singapore in the last few years, thanks to light regulation and the relative ease of setting up shop. That year there were 350 hedge funds with $61 billion in assets under management aum , compared to 300 managers and $80 billion in aum in 2007.

Michael coleman, chairman of the singapore chapter of the alternative investment management association aima , said: 'it's a sensible set of criteria that strikes a reasonable balance between bringing some regulation without making it too draconian. What may cause more problems would be the requirement for two officers, but it's not an unreasonable criteria.' peter douglas of gfia says: 'at first glance, it seems incredibly sensible. I suspect the mas wanted to reassure the rest of the world that they are tightening up on the regulatory environment. But still keeping the exempt regime which is arguably the most sophisticated for looking after hedge funds.

'there is nothing there that would be difficult for anyone running a sensible fund management business.' david sandison of pricewaterhousecoopers said: 'if you don't have $250,0 as a fund manager, you can't be terribly serious. As far as the requirements for experienced individuals are concerned, that makes sense in terms of trying to upgrade the quality of people.' the regime seeks to create three categories of fmcs: one is that of 'notified fmcs' which manage up to $250 million in assets and serve not more than 30 qualified investors of whom up to 15 can be funds. A second category is that of 'licensed a/i fmcs' which service accredited and/or institutional investors. Once a notified fmc's assets exceed $250 million, it will have to apply for a cms licence to operate as a licensed a/i fmc, and to satisfy the relevant criteria.