COVID-19

Following the raising of the Disease Outbreak Response System Condition (DORSCON) Alert Level from Yellow to Orange, the Singapore government called upon companies to step up business continuity plans and the Monetary Authority of Singapore (MAS) seconded this call in an advisory issued on 7 February 2020 for financial institutions in Singapore to adopt additional measures and precautions such as

• split team arrangements;
• anticipating increased demand for certain financial services;
• information of customers on the availability of services and operating hours; and
• monitoring and supporting staff morale.

Payment Services Act (PS Act)

The Payment Services Act (PS Act) which came into effect on 28 January 2020 saw many payment services providers scrambling to be regulated and apply for the appropriate licensing for their business activities. Cryptocurrency exchange giant, Binance, has applied for an operating license. Other reported applicants thus far include Tokyo-based crypto exchange operator Liquid Group Inc and London-based Luno. Greater clarity for businesses through explicit regulation was expected to be a key driver for new entrants. Read here for more information

We understand that MAS is moving quickly to license payment service providers. Ingenia is assisting various payment services providers in the upgrading of their frameworks and licensing applications, in particular, remittance, money changing and digital token payments activities. Contact us if you would like to discuss how we can facilitate your application.

With the start of the Payment Services Act, the Payments Supervision Office in MAS has been reorganized as the Payments Department comprising the Payment Policy Division, Payments Supervision Division and the Large Value Payment Systems Unit. Click here for a brief outline of the segregation of divisions.

US, Singapore Support Cross-border Data Transfer by Financial Institutions

The Monetary Authority of Singapore (MAS) and the US Treasury, in a joint statement on Thursday, 6 February 2020, supported the case for cross-border data transfer by financial services firms without the need for data localisations, as long as financial regulators have access to data needed for regulatory and supervisory purposes.

Data localisation is the practice of keeping data within a country’s borders.

The statement of intent is not legally binding, but through it, ‘the US and Singapore recognise that the ability of financial institutions to aggregate, store, process and transmit data across borders is critical to financial sector development.’

Read more here.

Variable Capital Companies

The Singapore Variable Capital Company (VCC) has been the new talk of the town for fund managers, family offices and investors. Fund managers were promised cost savings and greater flexibility around share issuance, redemption, and the payment of dividends. Managers will also be able to incorporate multiple funds in a single VCC to save costs.

Following the inaugural launch of 20 investment funds as VCCs, funds are also getting redomiciled. Mindful Wealth, an external asset manager, has re-domiciled its flagship fund from the Bahamas to Singapore. Singapore was chosen over jurisdictions with similar frameworks including Luxembourg, Ireland and Mauritius. It is much faster and cheaper to set up or re-domicile a fund in Singapore than in other jurisdictions. A reputation for being transparent and well-regulated tipped the scales, read more.

If you would like to access Ingenia’s wealth of available fund managers to incorporate a VCC, we hope to meet with you and hear from you.

The VCC introduces a level of operational efficiency that can improve the efforts of fund managers to maximise investment opportunities. It delivers four main benefits to asset holding structures:

• Ringfenced Assets and Liabilities: The assets under the VCC can be segregated into independent balance sheets, each a “sub-fund”. From an accounting and legal application, the assets and liabilities from each sub-fund are ringfenced within that sub-fund.[1] Because of the statutory application granted to this principle, investors are protected as no fund manager can through contract or constitution of the company, circumvent the statutory ring-fencing.[2]
• Ability to repurchase and redeem fully paid shares: Unlike traditional companies, the VCC repurchase or redeem fully paid shares[3] without the approval of the shareholders. This is particularly useful in open-ended funds since a regular Singapore SPC would require regulatory[4] and shareholder approval while meeting solvency requirements to effect a redemption of shares or a reduction of capital.
• Confidentiality of investors, shareholders and fund constitution: The register of members or investors are maintained by the VCC[5]. This also means that the confidentiality of the investors is in the hands of the managers of the VCC and not the regulators unlike a private company in Singapore. This register is however subject to a right of statutory inspect by regulator, the manager of the VCC, a custodian of the funds or anyone as ordered by court.[6]
• Tax Efficiency: There are over 50 notable bilateral double tax avoidance treaties (DTAs) in Singapore[7]. A VCC would be a tax resident in Singapore as the control and management of the VCC is here in Singapore[8]. DTAs prevent investors in being taxed in their home jurisdiction if they have already been taxed in Singapore. In Singapore capital gains, such as the profits from the sale and purchase of investment instruments are not taxable[9].

Requirements
To enjoy the benefits of setting up a VCC there are however five key requirements.

1. Only fund managers (licensed or registered) (FMC) can be appointed the managers of the VCC.[11] Only a representative director of the FMC can be a director of the VCC and thus must meet all the requirements of fit and proper[12].
2. The director must be resident in Singapore[13].
3. A registered office in Singapore[14]
4. Appointment of an auditor[15]
5. Appoint a secretary[16]

Incorporation Grants: MAS has also launched a Variable Capital Companies Grant Scheme. The grant scheme will help defray costs involved in incorporating or registering a VCC by co-funding up to 70% of eligible expenses paid to Singapore-based service providers. The grant is capped at S$150,000 for each application, with a maximum of three VCCs per fund manager.[10]

If you would like to explore how you could benefit from a VCC, get in touch with us.

Industry Updates & Developments

Coronavirus Fears Reflected ‘Violently’ in Global Markets

Representatives from private banks chime in on the virus, which has shaken financial markets. The Wuhan virus outbreak continues to grip headlines, as the search for a vaccine continues. Even so, will the virus have a long-term impact on financial markets? What should investors be looking out for amidst the noise? Representatives from the chief investment offices at six private banks weigh in.

Opportunity for Indian Family Offices in Singapore

India’s latest budget move on wealthy non-resident Indians could see an uptick in the family office scene in Singapore, a city-state that is home to over 100 family offices.

HNWIs and other individuals who avoid paying taxes anywhere in the world may have to pay tax on income generated. This could now prove problematic for wealthy NRIs who have significant assets in the country. Changes to the residency rules may also motivate more HNW families to establish overseas family office structures that can employ members of the family.

Singapore has become a preferred hub for NRIs to establish family offices due to the tax incentives for investment management activities. Click here to read the full story.

If you are interested in setting up a multi-family office, reach out to us to learn about the requirements.

Europe Is Exploring Higher Standards For Sustainbale Finance

The European Securities and Markets Authority (ESMA) has released its strategy on sustainable finance. Its strategy outlines how the regulator will place sustainability at the core of its activities and embed environments, social and governance (ESG) factors into its work.

There are a number of priorities the regulator has indicated in the strategy spanning transparency obligations, risk analysis on green bonds, ESG investing, convergence of national supervisory practices on ESG factors, taxonomy, and supervision. One of its main priorities is to complete the regulatory framework on transparency obligations through the disclosures regulation. Another priority will be reporting on trends, risks and vulnerabilities (TRV) of sustainable finance by including a dedicated chapter in its TRV Report, indicators on green bonds, ESG investing and emission allowance trading. Click here for the full story