Capital Markets Services (CMS)

Capital Markets Services (CMS) Licences provide a comprehensive regulatory foundation for businesses operating in Singapore's capital markets. Regulated by the Monetary Authority of Singapore (MAS), CMS Licences are essential for firms offering services such as fund management, corporate finance advisory, and credit rating activities. Designed to support compliance and growth, the CMS Licence ensures businesses meet the necessary standards to build investor trust and gain credibility within Singapore's competitive financial ecosystem.

Overview

Capital Requirements

  • Depending on the type of CMS licence, the capital requirements may go from S$50,000 to S$1,000,000

Transaction Limitations

  • The CMS licence itself does not specify transaction limits for entities operating under it. Instead, the focus is more on compliance with regulatory standards and maintaining financial stability rather than specific transaction limits.

Safeguarding Requirements

  • CMS licence holders are required to implement robust internal controls and risk management systems to safeguard customer funds. These measures are essential to protect client assets in the event of insolvency or operational risks.

Jurisdictional Limitations

  • The CMS licence is specifically for conducting regulated activities within Singapore. However, entities that wish to operate outside Singapore or engage in cross-border activities must comply with additional regulations.

Legal & Regulatory Framework

  • Securities and Futures Act (SFA) 2001

  • Guidelines on Licensing and Conduct of Business for Fund Management Companies 2018

  • Guidelines to All Holders of a Capital Markets Services Licence for Real Estate Investment Trust Management 2016

  • Guidelines on Fit and Proper Criteria [FSG-G01] 2010

  • Notice SFA 04-N02 to Capital Markets Intermediaries on Prevention of Money Laundering and Countering the Financing of Terrorism 2015

Key Restrictions

  • Scope of Activities: CMS licence holders are restricted to conducting only the specific regulated activities they are licensed for under the Securities and Futures Act (SFA).

  • Base Capital Requirements: There are minimum capital requirements that vary depending on the type of regulated activities.

  • Financial Resources: All CMS licensee, except for credit rating agency, are required to maintain financial resources which are in excess of its total risk requirements.

Regulatory authorisation process

  • The Monetary Authority of Singapore (MAS) usually assesses a complete application within 6 months. However, this can vary depending on the application's complexity and the completeness of the information provided.

  • The Monetary Authority of Singapore (MAS) requires an application fee of S$1,000.

Key Personnel Requirements

  • MAS mandates specific criteria for upper management of CMS licence holders. Companies must appoint at least two directors, with one based in Singapore, and a CEO with a minimum of 10 years of relevant experience who resides in Singapore. Additionally, at least two full-time representatives based in Singapore are required for each regulated activity.

Regulatory Updates

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Deep dive into Capital Markets Services (CMS)

Introduction

  • Explore the advantages of obtaining a Capital Markets Services (CMS) Licence in Singapore, regulated by the Monetary Authority of Singapore (MAS). The CMS Licence is essential for businesses offering services such as fund management, corporate finance advisory, and credit rating activities. This licence is ideal for firms aiming to operate in Singapore’s dynamic capital markets sector with regulatory backing from MAS. Designed for companies engaged in capital market activities, the CMS Licence offers a structured framework that supports compliance, growth, and investor trust. By securing a CMS Licence, businesses gain the credibility and market access required to thrive in Singapore's financial ecosystem.

Definition

  • A Capital Markets Services (CMS) Licence authorises businesses to engage in specific capital market activities such as fund management, corporate finance advising, and dealing in capital market products. Regulated by the Monetary Authority of Singapore (MAS), the CMS Licence establishes essential requirements for firms to operate compliantly in Singapore's financial market.

Services Provided

  • Fund management

  • Corporate finance advisory

  • Credit rating activities

  • Dealing in capital markets products

  • Real estate investment trust management

  • Product financing

  • Custodial services for securities

Additional Information (Services)

  • Fund management: The business of managing a portfolio of capital markets products on behalf of customers. This involves making investment decisions regarding a pool of monies or assets, distinguishing it from companies whose primary business is not fund management.

  • Corporate finance advisory: Providing advice concerning corporate finance matters, including mergers and acquisitions, capital raising, and financial restructuring. This service assists corporations in making informed financial decisions and structuring transactions effectively.

  • Credit rating activities: The process of evaluating the creditworthiness of entities or financial instruments. Credit rating agencies assess the likelihood of default and assign ratings that influence investment decisions and regulatory requirements.

  • Dealing in capital markets products: Engaging in activities such as buying, selling, or underwriting securities, futures contracts, and other financial instruments. This includes market-making and trading on behalf of clients or the institution itself.

  • Real estate investment trust management: The business of managing the property of, or operating, a real estate investment trust.

  • Product financing: Refers to providing credit facilities, advances, or loans to support:

    (a) Subscribing for specified products listed on organised markets.

    (b) Purchasing specified products listed on organised markets.

    (c) Purchasing other prescribed specified products.

    (d) Maintaining holdings of the specified products mentioned above .

    However, it excludes:

    (e) Loans related to underwriting arrangements.

    (f) Loans to licensed capital market service holders for acquiring or holding specified products.

    (g) Loans from companies to their directors or employees for acquiring their own products.

    (h) Loans between group companies for product acquisition or holding.

    (i) Loans from individuals to companies in which they hold 10% or more of the share capital for product acquisition or holding.

  • Custodial services for securities: involves offering services related to specified products where the service provider has possession or control of these products on behalf of a customer. The functions may include:

    (a) Settling transactions involving the specified products.

    (b) Collecting or distributing dividends and other benefits.

    (c) Paying taxes or costs associated with the products.

    (d) Exercising rights, including voting rights.

    (e) Any necessary functions for safeguarding or administering the products.

    However, it excludes:

    (f) Activities of a corporation defined as a Depository.

    (g) Services to related corporations or connected persons, unless specific conditions regarding trust or custodial services are met.

    (h) Services by nominee corporations that are incidental to their business.

    (i) Any other activities prescribed by the Authority.

Additional Information (Legal & Regulatory Framework)

  • Securities and Futures Act (SFA): The primary legislation governing capital markets activities in Singapore, setting out the regulatory framework for entities engaging in securities, futures, and other capital markets products

  • Guidelines on Licensing, Registration and Conduct of Business for Fund Management Companies: These guidelines provide specific requirements for fund managers, detailing operational standards and conduct expectations

  • Guidelines to All Holders of a Capital Markets Services Licence for Real Estate Investment Trust Management: This document outlines admission criteria and ongoing obligations for REIT managers to ensure compliance with regulatory standards.

  • Guidelines on Fit and Proper Criteria [FSG-G01]: These guidelines ensure that controllers, directors, and key personnel meet the necessary standards of integrity, competence, and financial soundness.

  • Notice SFA 04-N02 to Capital Markets Intermediaries on Prevention of Money Laundering and Countering the Financing of Terrorism 2015: This notice is a crucial regulatory document issued by the Monetary Authority of Singapore (MAS) that outlines the AML/CFT requirements for CMS licence holders.

Links

Additional Information (Key Restrictions)

  • Scope of Activities: CMS licence holders are restricted to conducting only the specific regulated activities they are licensed for under the Securities and Futures Act (SFA). This limitation ensures that entities operate within their area of expertise and regulatory approval. A CMS licence holder authorised for fund management cannot engage in dealing in capital markets products without obtaining the appropriate licence extension.

  • Base Capital Requirements: CMS licence holders must maintain minimum capital levels that vary depending on the type of regulated activities they conduct.

    Broker dealer: S$50,000 to S$5 million in base capital

    SCF operator: S$50,000 to S$1 million in base capital

    Corporate finance advisor: S$250,000 is the base capital requirement

    Credit Rating Agency: $250,000 is the base capital requirement

    REIT manager: $1,000,000 is the base capital requirement

    These requirements ensure that entities have sufficient financial resources to support their operations and protect client interests.

  • Financial Resources: Broker-dealers must maintain financial resources that exceed their total risk requirements. This obligation ensures that these entities have sufficient capital to cover potential losses and maintain market stability.