REASONS FOR FAILURE IN LICENSING & REGISTRATION APPLICATIONS AND THE ROLE OF SERVICE PROVIDERS
Since 2019, MAS has published an annual Licensing and Registration Report for Capital Markets Intermediaries. The report provides information on the profile of intermediaries admitted and the application trends observed by the MAS. We digest the notable points of the 2021 report.
In 2021, MAS processed 293 capital markets intermediaries (CMI) licence and registration applications, 4% more than the 282 applications processed in 2020 and 30% more than the 225 applications processed in 2019. The bulk of applications were to conduct fund management activity.
Of the 293 applications processed in 2021, 61% had shareholders that were Singapore citizens or Singapore companies, a significant jump from 38% in 2020. As in 2020, the majority of foreign shareholders were from Asian countries such as China or India.
The MAS stated that an increase in applications, particularly those with gaps or inconsistencies in submitted information, lengthened processing times for most types of applications. With effect from 1 March 2022, MAS revised its committed processing time from 4 months to 6 months for capital markets services licences excluding venture capital fund managers (VCFMs), registered fund management companies, approved trustees and licensed trust companies and from 2 months to 4 months for VCFMs. The committed processing time for other types of licence applications remains unchanged at 4 months.
The MAS announced that 30% of applicants failed to obtain a registration or licence in 2021, up from 22% in 2020. It cited two key reasons for application rejections.
1. Inadequate control by the management team
Many applications failed due to inability to demonstrate commitment to a long-term, bona fide business in the regulated activity applied for. The MAS singled out fund managers where there was insufficient anchoring of the CEO and executive directors.
2. Applicants that did not fully meet admission criteria or disclose adverse records or having business models that did not qualify for licence or registration
The MAS stated it turned away applicants who had business models which did not qualify for licence or registrations, pointing to MAS guidelines and frequently asked questions which provided examples of such business models. Other applications were rejected for having business plans that were not credible and coherent, or which frequently changed during MAS’ review of the application. The MAS advised applicants to defer applying until they were able to submit all required information for a licence or registration, for example, on appointment holders and key personnel. MAS also stated the importance of fully disclosing adverse records, adding it would not hesitate to act against applicants who provided false or misleading information or omitted material information.
3. The role of service providers in the application process
The MAS observed that more applicants hired service providers, such as specialist compliance consulting firms and other firms. In 2021, 56% of applicants were assisted by service providers, up from 47% in 2020. MAS viewed this positively, stating that service provider-assisted applications tended to be more complete, with fewer errors, thus expediting application processing. However, MAS noted varying quality of submissions handed by different service providers.
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