Introduction
On 10 December 2024, the Monetary Authority of Singapore (MAS) issued the updated Guidelines on Licensing and Conduct of Business for Fund Management Companies (Guidelines), which outline MAS’ expectations for fund management companies (FMCs) to put in place measures to mitigate any actual or potential conflicts of interest (COIs). The updated Guidelines are applicable to all FMCs. We highlight below the significant changes to the earlier version of the Guidelines that, in our view, require attention and prompt action by FMCs, as necessary.
Key changes to Guidelines
Prior to the update, the Guidelines provided that FMCs put in place mitigating measures to address any COIs and, where appropriate, disclose any actual or potential COIs to their customers.
The updated Guidelines now also provide that:
- Such mitigating measures may include taking steps to prevent circumstances that could lead to actual conflicts from arising and, where appropriate, to disclose the implications of such COIs to customers.
- In the course of their business, FMCs are expected to ensure that COIs are managed in the best interests of their customers. This includes having a mechanism in place to identify COIs that may arise and ensuring that the measures put in place effectively mitigate these COIs on an ongoing basis.
- The policies developed to mitigate COIs should be independently reviewed and approved by an appropriate level of authority (e.g., senior management, the board of directors, a relevant committee or at the group level).
- The assessment of the conflicts and mitigating measures taken should be documented and made available to MAS upon request.
Further, the updated Guidelines have revised and expanded the examples of scenarios where COIs can arise. It should be noted that the term ‘customers’ in the examples provided by MAS also includes the unitholders or underlying investors of fund vehicles, and that these examples are not meant to be exhaustive or prescriptive.
The updated Guidelines also set out guidance on the good practices that FMCs should adopt to ensure proper conflict management, and that an FMC may tailor these practices according to its business model, structure and/or the funds that it manages, or consider ways to mitigate such conflicts beyond the examples listed.
A copy of the updated Guidelines can be found through this link.
Conclusion
The updated Guidelines reflect MAS’ commitment to protecting customers’ interests and enhancing their confidence in the financial sector.
Given the additional guidance provided under the updated Guidelines, FMCs should review their existing policies, systems, processes and business practices to ensure that they are aligned with the updated Guidelines and take action to effect necessary changes where system or process enhancements are needed to meet specific areas of the updated Guidelines.
Client Alert 2024-247