Compliance
Industry Group Welcomes Singapore Regulator's VCC Report

The president of the Association of Independent Wealth Managers Singapore comments about what MAS recently said about the state of the city-state's Variable Capital Companies regime, which came into force more than five years ago.
A recent call – discussed
here – by the Monetary
Authority of Singapore to weed out slack practices in
Variable Capital Companies (VCCs) has been praised by a prominent
business organisation in the sector.
“Ultimately, we view this as a recalibration and necessary step
in fortifying the ecosystem, ensuring that the VCC framework
rests on a strong, credible foundation,” Jolene Tan (main
picture), president of the Association of Independent Wealth
Managers Singapore, said.
VCCs, established at the start of 2020, are part of Singapore's
push to raise its stakes as a wealth management sector. VCCs are
flexible corporate structures used for both open-ended and
closed-end investment funds; they can invest in a wide range of
assets, including equities and fixed income instruments, both in
public and private asset markets. The vast majority are offered
to only accredited and/or institutional investors. VCCs enable
branches of a family with different goals to run separate
sub-funds while pooling their costs.
Among the areas of concern, in late June, MAS said that some VCCs
did not maintain their assets with independent custodians;
certain VCCs appointed additional directors who were not
appointed representatives of the VCC manager; managers in some
cases managed VCCs that held no assets or had no investors; and
there were cases of VCCs holding illiquid assets on behalf of a
single investor or a few related investors, which previously
belonged to these investors.
“MAS’ core compliance expectations have long applied to CMS
licence holders and VCC fund managers. What we are seeing now is
a clear intensification in MAS’ supervisory stance, marked by
strong enforcement actions, thematic reviews, and more visible
communication of its expectations,” Tan told this news service.
(She is also co-founder of SingAlliance Pte. This news service
separately interviewed Tan in April about trends in the
external asset management, family offices and funds sectors.)
“Strengthening the market integrity today will enhance
regulators’ confidence to evolve toward the next phase of
development, including what many anticipate as a `VCC 2.0’,” Tan
said. The latter point refers to a second iteration of the VCC
model. MAS is looking at the feasibility of widening the scope of
fund managers permitted to use the VCC structure, to potentially
include specific classes and to allow licence exempt managers,
such as single-family offices.
The MAS report “signals MAS’ intent to reinforce consistently
high standards across the entire industry. The heightened
scrutiny forms part of a broader and ongoing regulatory effort to
uplift the quality of market participants and, in particular, to
close potential gaps in AML/CFT frameworks,” Tan said.
The regulator is cracking down on dormant or shell VCCs with
little or no substantive activity; it is reinforcing the need for
real governance and management substance; MAS is tightening
controls on fund structures and cross-border flows, ensuring that
these are not exploited for illicit purposes and that
intermediaries uphold robust AML/CFT safeguards.
“For managers that are already operating with a high level of
compliance, these measures largely reflect a formalisation of
existing best practices,” Tan said.
“The greater impact will be felt by those lagging in compliance
maturity, particularly firms relying on minimal substance,
outdated practices, or attempting to bypass regulatory
expectations. These entities now face stronger regulatory
headwinds, prompting either a step-up in regulatory governance or
a potential exit from the market,” Tan added.