Securities and Futures (Licensing and Conduct of Business) Regulations

Duties of holder of capital markets services licence for regulated activity of fund management

13B.—(1) Without prejudice to regulation 13, the holder of a capital markets services licence for fund management shall —

(a)

put in place a risk management framework (that identifies, addresses and monitors the risks associated with assets under its management) which is appropriate to the nature, scale and complexity of the assets;

(b)

subject assets under its management to independent valuation for the purpose of determining their respective net asset values, and ensure that a party independent of the holder conveys such values to the customers to which the assets relate or, if the assets are in the form of units in a closed-end fund or collective investment scheme, to the unitholders of the fund or scheme;

(c)

segregate assets under its management, other than assets which are already subject to regulation 17 or 27 (as the case may be), from the proprietary assets of the holder or the holder’s related corporations or connected persons, and maintain them in —

(i)	a trust account with any financial institution referred to in regulation 17(1)(a), (b) or (c), or with a custodian outside Singapore which is licensed, registered or authorised to conduct banking business in the country or territory where the account is maintained; or
(ii)	a custody account with any financial institution or other person referred to in regulation 27(1)(a) to (f), or with a custodian outside Singapore which is licensed, registered or authorised to act as a custodian in the country or territory where the account is maintained;

(d)

accord priority to transactions for the purchase or sale of capital markets products that are permitted to be traded on an approved exchange or a recognised market operator, made on behalf of its customers, over those made for any of the following persons:

(i)	the holder;
(ii)	the holder’s associated persons;
(iii)	the holder’s officers;
(iv)	the holder’s employees;
(v)	the holder’s representatives;
(vi)	any person whom the holder knows to be an associated person of any person referred to in sub-paragraph (iii), (iv) or (v); and [S 667/2018 wef 08/10/2018]

(e)

mitigate conflicts of interest arising from the management of assets and, where appropriate, disclose such conflicts of interest to the customer concerned.

(2) A transaction made for any person referred to in sub-paragraphs (i) to (vi) of paragraph (1)(d) excludes any transaction for the purchase or sale of capital markets products which are, or are to be, beneficially owned by a person who is not referred to in sub-paragraphs (i) to (vi) of paragraph (1)(d).

[S 667/2018 wef 08/10/2018]

(3) In paragraph (1)(d), a person is an associated person of another person if the first-mentioned person is —

(a)	a related corporation of the second-mentioned person;
(b)	a connected person of the second-mentioned person;
(c)	a person who is accustomed or is under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the second-mentioned person in relation to a transaction or investment referred to in paragraph (1)(d); or
(d)	a corporation which is, or the directors of which are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the second-mentioned person in relation to a transaction or investment referred to in paragraph (1)(d).

(4) Paragraph (1)(c) does not apply to the following assets under the management of the holder:

(a)

capital markets products which are not listed for quotation or quoted on an organised market;

[S 667/2018 wef 08/10/2018]

(b)

interests in a closed-end fund or an arrangement mentioned in paragraph (aa) of the definition of “closed-end fund” in section 2(1) of the Act, where —

(i)	the closed-end fund or arrangement is to be used for private equity or venture capital investments; and [S 667/2018 wef 08/10/2018]
(ii)	interests in the closed-end fund or arrangement are offered only to accredited investors or institutional investors or both,

and the holder has —

(A)	disclosed the fact that the assets are not maintained in a trust account or custody account in accordance with paragraph (1)(c) to the customer and obtained the customer’s acknowledgement of the custody arrangement; and
(B)	arranged for an auditor to audit the assets on an annual basis and furnish a report on the audit to the customer. [S 667/2018 wef 08/10/2018]

(5) For the purposes of this regulation, assets are under the management of the holder of a licence if they are the subject of fund management carried out directly by the holder, or indirectly by the holder through another entity.

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