Winston Wong (14 July 2025) – The Circular IID Number 04/2025 issued by the Monetary Authority of Singapore (MAS), Singapore’s central bank and financial regulatory authority, reported that it had carried out a “review” of Singapore VCCs (Variable Capital Companies) in 2024, gleaned key observations therefrom, and set out its supervisory expectations and good practices for VCC managers. The Circular states that MAS continues to conduct supervisory reviews of the specific VCC managers identified with lapses.
The MAS identified 4 regulatory requirements as key compliance requirements of VCCs:
1. A VCC comprises one or more CIS (collective investment scheme).
2. A VCC must have a MAS-regulated manager to manage its property or operate the CIS that comprise the VCC.
3. A VCC must have a director who is a director or qualified representative of the MAS-regulated appointed manager.
4. A VCC must engage an EFI (eligible financial institution) to conduct AML/CFT compliance under MAS Notice VCC-N01
MAS specifically identified some areas of worthy of highlight in its Circular:
1. VCCs did not report having independent custody arrangements as required for specific assets.
2. Persons appointed as Directors of the VCC who are not directors or representatives of the VCC manager cannot be engaged in regulated activities. They must otherwise be appointed as licensed representatives (and be appropriately credentialed) of the VCC manager.
3. It was noted some VCC managers manage multiple VCCs that did not hold any assets and/or did not have any investors despite being in incorporated for more than a year. We assume this echoes MAS’s general negative attitude against the existence of shell companies.
4. It was pointed out some VCCs hold illiquid assets on behalf of a single investor or a few connected investors. The VCC is intended to be a vehicle for collective investment, (a) not as a holding vehicle for effectively one investor (hence “collective”), and (b) not as a passive holding vehicle for unmanaged assets (and hence the “investment”). Further, MAS elaborated that VCC managers should not: (a) accept an appointment where there is no substantive input or influence over the VCC’s operations; (b) set up VCCs that merely serve as a conduit for the offer of funds managed by other fund managers; or (c) purely engage in the marketing of the VCCs.
The MAS reiterated the VCC’s legal obligations to comply with AML/CFT regulations without identifying any specific area of lapse. We feel that MAS’s recent stern position regarding the “Fujian Gang” and censuring of nine banks, capital markets services license holders and trust companies needs no reprise.
It is anticipated there will be increased focus on all of the abovementioned areas in MAS’s routine audit activity.
It is our view the above renewal of MAS’s commitment to a robust proactive regulated environment of Singapore’s fund management industry is a solid step forward.
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