In Singapore, collective investment schemes (CIS) are a popular way for individuals to pool their resources and invest in a variety of assets.
These schemes are regulated by the Monetary Authority of Singapore (MAS) and are offered by licensed fund managers.
There are several types of CIS available in Singapore, including unit trusts, mutual funds, and exchange-traded funds (ETFs).
CIS are attractive because they allow individuals to diversify their investments and potentially earn higher returns than investing in individual assets.
Singaporeans can invest in CIS through various channels, including banks, insurance companies, and online platforms.
Investing in CIS is subject to certain fees and charges, which can eat into returns.
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What is a CIS?
A Collective Investment Scheme (CIS) is an arrangement that allows individuals to pool their resources to invest in a property. This arrangement is designed to enable participants to benefit from the profits or income generated by the property.
To qualify as a CIS, the arrangement must have two key characteristics: participants have no day-to-day control over the management of the property, and either or both of the following must be present:
- The purported purpose or effect of the arrangement is to enable participants to participate in or receive profits/income arising from the property.
In essence, a CIS is a way for people to invest in a property together, without having direct control over its management.
Regulations and Standards
The ASEAN SRFS, or ASEAN sustainable and responsible fund standards, aims to provide a consistent framework for collective investment schemes (CIS) to follow. This framework helps ensure that CIS with an environmental, social, and governance (ESG) investment focus are transparent and accountable.
CIS or CIS operators must demonstrate compliance with the ASEAN SRFS to qualify. This means they must disclose certain information that helps investors make informed decisions. The ASEAN SRFS helps mitigate the risk of greenwashing by ensuring a uniform and transparent disclosure of information.
ASEAN Fund Standards
The ASEAN Fund Standards aim to provide a consistent and transparent framework for collective investment schemes with an environmental, social, and governance (ESG) focus.
To achieve this, the ASEAN Sustainable and Responsible Fund Standards (SRFS) set minimum disclosure and reporting requirements for CIS operators.
These requirements help mitigate the risk of greenwashing by ensuring that CIS operators demonstrate compliance with the ASEAN SRFS.
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This allows investors to make more informed decisions based on accurate and comparable information about CIS with ESG investment focus.
The ASEAN SRFS guides CIS operators on the disclosure of information, helping them understand what is required to meet the standards.
By following these standards, CIS operators can provide investors with the confidence that their investments align with their values and goals.
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Code Breach
A breach of the Code can have serious consequences for a scheme's approval or acknowledgement. A failure to comply with any requirement in the Code will not automatically lead to criminal proceedings, but it can be taken into account by the Authority when making decisions about a scheme's approval.
The Authority can revoke or suspend a scheme's approval or acknowledgement if the responsible person has breached the Code. This is a serious consequence that can impact a scheme's ability to operate.
A breach of the Code by a trustee or custodian of a VCC or sub-fund can also have serious consequences. The Authority can revoke approval or prohibit the trustee or custodian from acting for new schemes.
The specific section of the SFA that outlines this is section 289. This section is crucial for understanding the potential consequences of a Code breach.
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Getting Authorisation
To get authorisation for your Collective Investment Schemes, you need to apply through Form 1 on OPERA.
The Monetary Authority of Singapore (MAS) will approve your authorisation status under two conditions.
The first condition is that the manager of the fund must hold a capital markets services license.
If you have a trustee for the CIS, they must be approved under section 289 of the Securities and Futures Act (SFA).
Authorisation can only be given to companies that are willing to constitute their CIS in Singapore.
This means that if you're planning to set up a CIS in Singapore, you'll need to meet these conditions to get authorised.
MAS Guidelines
The Monetary Authority of Singapore (MAS) has established guidelines for collective investment schemes to ensure investor protection and market integrity.
To be approved, a collective investment scheme must be registered with the MAS.
The MAS requires the scheme's manager to be a licensed entity, which means they must meet certain criteria such as having sufficient experience and expertise.
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The MAS also requires the scheme's manager to disclose all relevant information to investors, including the scheme's objectives, risks, and fees.
Investors must be given a prospectus, which outlines the scheme's terms and conditions, before they can invest.
The MAS has set out specific rules for the advertising of collective investment schemes, including restrictions on the use of certain words and phrases.
The MAS has also established a framework for the regulation of collective investment schemes, which includes ongoing monitoring and reporting requirements.
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Unit Offer Requirements
To offer units in a collective investment scheme in Singapore, you'll need to meet certain requirements. The Monetary Authority of Singapore (MAS) regulates offers of units in a CIS under Division 2 of Part XIII of the SFA.
First, you'll need to ensure your CIS is authorized or recognized by MAS. If your CIS is constituted in Singapore, it must be authorized by MAS. If it's constituted outside Singapore, it must be recognized by MAS.
To apply for authorization, you'll need to use Form 1 on OPERA and meet the following conditions: the manager must hold a capital markets services licence, and there must be a trustee approved under section 289 of the SFA.
Alternatively, to apply for recognition, you'll need to use Form 2 on OPERA and meet the following conditions: the laws and practices of the CIS jurisdiction must afford to investors in Singapore, protection equivalent to that provided by authorized schemes; the manager must be licensed or regulated in its principal place of business; and there must be an appointed Singapore representative.
In addition to authorization or recognition, you'll also need to present the offer of units in a CIS with or include a MAS-registered prospectus and product highlights sheet.
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Restricted and Settlement Schemes
Restricted schemes in Singapore are exempt from certain requirements, but come with specific conditions. These schemes are only offered to "relevant persons" as defined in the SFA, or to individuals investing at least S$200,000 per transaction.
To operate a restricted scheme, you must notify the Monetary Authority of Singapore (MAS) through the CISNet portal and be included in the MAS list of restricted schemes before making an offer.
Key details about the restricted scheme must be included in the information memorandum presented to investors. This includes information such as the scheme's objectives, risks, and fees.
CIS Bank Purchases Settlement
When Peter dies, the bank will only deal with the legal representative of Peter's estate, requiring a letter of administration or grant of probate and death.
The bank will not pay out to Peter's next of kin, unlike a small savings account, because there is no procedure for the settlement of CIS.
The legal representative of Peter's estate can choose not to liquidate the CIS, allowing the units to be transferred to the lawful beneficiaries.
If the legal representative decides to liquidate the CIS, the proceeds will be made payable to the "Estate of Peter", and the bank may net off the unit trust proceeds with any outstanding debt or liabilities taken by the deceased with the bank.
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The bank acts as a nominee for investors in CIS, holding the units from the fund manager as a nominee for the investor.
The bank reserves the right to deal with the legal representative of the deceased person's estate, similar to when the CIS product is purchased through a life insurance company.
The legal representative can transfer the fund units to the lawful beneficiaries, without needing to liquidate the units.
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Restricted Schemes
Restricted schemes are exempt from scheme authorisation or recognition and prospectus requirements, but only if certain conditions are met.
To qualify, the offer must be presented with an information memorandum that includes key details about the restricted scheme. This is a crucial step in the process.
Restricted schemes are only offered to "relevant persons" as defined in section 305(5) SFA, or at a minimum of S$200,000 per transaction. This ensures that only those who are eligible can participate.
To be included in the MAS list of restricted schemes, the manager must be licensed or regulated to manage the scheme property in their jurisdiction. They must also be deemed fit and proper to manage the scheme.
Here are the specific requirements for being included in the MAS list of restricted schemes:
- The offer is presented with an information memorandum that includes key details about the restricted scheme.
- The manager is licensed or regulated to manage the scheme property in the jurisdiction of their principal place of business and is deemed fit and proper.
Frequently Asked Questions
Which investment plan is best in Singapore?
There is no one-size-fits-all "best" investment plan in Singapore, as the most suitable option depends on your personal financial goals, risk tolerance, and time horizon. Consider exploring various options such as CPFIS, SRS, and Stocks to find the one that aligns with your investment needs.
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