Singapore's VCC Framework Strengthens: MAS Issues New Governance Guidelines

After Thematic Review

The Monetary Authority of Singapore (MAS) has issued detailed guidance for Variable Capital Company (VCC) managers following a thorough review of the sector's growth and compliance practices. The circular, published on 26 June 2025, provides essential insights into the current state of Singapore's VCC ecosystem and sets clear expectations for fund managers going forward.

VCC Growth Continues Strong Trajectory

Since launching in January 2020, Singapore's VCC framework has achieved notable success. By 31 March 2025, approximately 1,200 VCCs were operating in Singapore, demonstrating consistent year-on-year growth. These flexible corporate structures are managed by around 600 regulated financial institutions, including fund management firms and banks, and serve both open-ended and closed-end investment strategies across public and private markets.

Most VCCs serve only accredited and institutional investors, strengthening Singapore's reputation as a refined financial hub for professional investment entities.

Key Regulatory Requirements Reinforced

MAS has reiterated four fundamental requirements that underpin VCC governance:

Collective Investment Scheme Structure: VCCs must function as one or more collective investment schemes in corporate form, ensuring they genuinely serve pooled investment purposes rather than merely acting as conduits.

MAS-Regulated Management: Each VCC must have a manager supervised by MAS to oversee property management and CIS operations.

Director Appointment: VCCs must include at least one director, who is either a director or a qualified representative of the VCC manager, ensuring direct management oversight.

Anti-Money Laundering Compliance: VCCs must engage an Eligible Financial Institution (EFI) to conduct essential AML/CFT checks and implement necessary compliance measures.

Areas of Supervisory Concern

The 2024 thematic review highlighted several areas where some VCCs and managers might not be fully complying with regulatory expectations.

Custody Arrangements: Some VCCs investing in listed securities and fixed income instruments lacked proper independent custody arrangements, which are mandatory except for private equity or venture capital investments offered only to accredited investors.

Substantive Management Activity: MAS identified instances where managers were not engaging in meaningful fund management activities, especially involving illiquid assets held for single investors or connected parties. The regulator emphasised that simply facilitating asset transfers without providing investment input does not qualify as substantive fund management.

Dormant VCCs: Several managers have been found maintaining VCCs without assets or investors for extended periods, despite being incorporated for over a year.

Director Licensing: Some additional directors involved in regulated activities were not always properly appointed as licensed representatives of VCC managers.

Enhanced AML/CFT Focus

The circular places strong emphasis on anti-money laundering and counter-terrorism financing obligations. VCCs must establish robust frameworks for customer identification, beneficial ownership verification, and enhanced due diligence for higher-risk clients. Directors must exercise proper oversight over appointed EFIs to ensure effective risk mitigation.

Particularly important is the requirement for VCCs to maintain accurate beneficial ownership registers and to supply this information to MAS and law enforcement agencies promptly upon request.

Industry Implications and Next Steps

Based on the survey findings, MAS is conducting targeted supervisory reviews of certain managers and may take regulatory action where needed. The regulator expects all VCC managers to:

Assess their management practices in light of the circular's observations.

Establish formal custody arrangements where necessary.

Ensure all individuals carrying out regulated activities hold proper licences.

Wind down inactive or unviable VCCs.

Demonstrate substantial fund management activities.

Looking Forward

This comprehensive review demonstrates MAS's commitment to maintaining high standards while supporting the ongoing development of Singapore's VCC ecosystem. The guidance offers clarity for managers, ensuring the framework fulfils its intended purpose of fostering genuine collective investment schemes rather than merely administrative structures. For VCC managers, the circular serves both as a compliance checkpoint and a guide to best practices. Those fully compliant can build confidence from the regulator's supportive attitude, while others receive clear instructions on what needs improvement.

The strong growth trajectory of VCCs, combined with these improved governance standards, positions Singapore's framework as a robust and attractive choice for sophisticated investors seeking flexible investment structures in Asia's leading financial centre. Fund managers and VCC operators should review their current practices according to these guidelines and consult qualified compliance professionals to ensure full compliance with regulatory expectations.