On 31 July 2023, the Monetary Authority of Singapore (MAS) issued a consultation paper on the proposed regulatory framework for single family offices (SFO).  The framework aims to simplify the licence exemption for SFOs and to address potential money laundering (ML) risks associated with funds used for establishing and operating SFOs.

Comments on the consultation paper should be submitted to MAS by 30 September 2023.

What is a Single Family Office?

An SFO is a private wealth management entity that is wholly-owned and controlled by a single high-net-worth (HNW) family, for the purpose of managing its own investments and other financial affairs. Typically, the HNW family’s assets are held by a fund vehicle which is managed by the SFO.

An SFO can be structured in several ways.  For example, HNW family members may establish a holding company to own both the SFO and the fund vehicle (Scenario A), or they may directly own the SFO and the fund vehicle (Scenario B).

‍New Class Exemption

Currently, a Scenario A SFO is exempt from licensing and other regulatory requirements under the Securities and Futures (Licensing and Conduct of Business) Regulations (SF(LCB)R) because it manages the assets of a related corporation. However, a Scenario B fund vehicle does not meet the definition of a “related corporation” with respect to a Scenario B SFO.  

Because from MAS’s perspective, an SFO and a fund vehicle in Scenario Bare not third-parties to each other, MAS is proposing a new class exemption under paragraph 5 of the Second Schedule of the SF(LCB)R that will exempt an SFO from obtaining a licence for managing the assets of a fund vehicle in Scenario B, provided that the SFO meets the following criteria:

• it is directly or indirectly wholly-owned by a single family;
• it manages funds solely for family members (including those family members’ trusts, wholly-legally- and beneficially-owned corporations and wholly-funded local or foreign charity) or for the SFO’s chief executive officer or executive director;
• it is incorporated in Singapore, so that the SFO is subject to beneficial ownership requirements by the Accounting and Corporate Regulatory Authority; and
• it maintains business relations with any specified MAS-regulated financial institution, so that the SFO is subject to ML and terrorism financing checks.

The term ‘family members’ refers to lineal descendants of a living or deceased common ancestor (including their current and former spouses, adopted children and current and former stepchildren) and the ancestor’s current and former spouses.

Other Regulatory Requirements

MAS also proposes to introduce the following regulatory requirements:

• Notification to MAS: SFOs must notify MAS within 7 days after commencing fund management operations in Singapore, to confirm that they meet the exemption criteria (Notification).  The Notification must be supported by a legal opinion. ‍
• Annual return: SFOs must submit an annual return to MAS within 14 days after the end of each calendar year.  The annual return must state the SFO’s total assets under management and the name of MAS-regulated financial institution with which the SFO has a business relationship.

Once the proposed changes take effect, existing SFOs have 6 months within which to submit the Notification to MAS. SFOs which have applied for a tax incentive under Section 13O or Section 13U of the Income Tax Act 1947 must submit a new legal opinion to MAS confirming that they meet the exemption criteria.  

Key Takeaway

MAS’s recommended changes to the SFO regulatory framework address ML concerns without sacrificing Singapore’s position as a leading financial centre in the Asia-Pacific region.  Existing and new SFOs should prepare to comply with the proposed new requirements to avoid breaching the SF(LCB)R.

For More Information

OrionW regularly advises clients on financial services regulatory and licensing matters.  For more information about compliance with Singapore laws and regulations, or if you have questions about this article, please contact us at info@orionw.com.

Disclaimer: This article is for general information only and does not constitute legal advice.