Singapore to tighten hedge fund regulation

A set of new rules is expected to be proposed by the Singaporean central bank that would tighten the regulation of the island-state’s hedge fund industry, and make it more difficult for smaller funds to be set up.

The Reuters report said that the Monetary Authority of Singapore (MAS) is believed to be in the process of drafting guidelines that will be announced in a public consultation in November. The guidelines are expected to require new hedge fund start-ups to detail clearly the qualifications and experience of its managers, and the infrastructure it has in place to ensure it has adequate levels of corporate governance.

However, it will not remove tax incentives fund managers currently enjoy in Singapore, according to the report’s unnamed sources.

Currently, smaller funds with less than 30 accredited investors are not required to hold a capital markets services license. This frees managers from fulfilling a number of requirements including the filing of a number of reports to regulators, and passing exams, the report said.

“MAS Is monitoring market developments and global initiatives, and will fine-tune our regulatory approach as appropriate,” a MAS spokeswoman told the news agency.
The report also quote unnamed fund managers as expressing concerned that exempt funds may be required to purchase indemnity insurance, raising costs.

David Gray, UBS’s head of Asia Pacific prime services told the news agency that there have been around 20 relatively large hedge funds set up in Singapore in 2009. He noted that new hedge funds tend to be bigger in light of the financial crisis because of the increased demands on meeting compliance, due diligence, and risk management needs.