MAS urges tighter governance for VCCs after thematic review

The regulator noted that some VCCs investing in listed equities and fixed income instruments lacked the required independent custody.

The Monetary Authority of Singapore (MAS) has warned fund managers to tighten governance and compliance in Variable Capital Companies (VCCs) after a thematic review found weaknesses in custody arrangements, director appointments, fund management activity, and anti-money laundering measures.

In a circular issued on 26 June 2025 (IID 04/2025), MAS reminded VCCs that they must be used as collective investment schemes, be managed by a MAS-regulated manager, and have at least one director who is also a director or qualified representative of the manager.

VCCs must also engage an eligible financial institution to fulfil anti-money laundering and counter-terrorism financing (AML/CFT) obligations, and ensure assets are segregated with an independent custodian.

The regulator noted that some VCCs investing in listed equities and fixed income instruments lacked the required independent custody, and that certain directors performing regulated activities were not licensed representatives of the VCC manager.

MAS also observed instances of VCCs with no assets or investors despite being incorporated for over a year, and cautioned against using VCCs merely as conduits without substantive fund management.

On AML/CFT, MAS stressed both VCCs and their appointed financial institutions must verify customer identities, maintain accurate registers of beneficial owners, conduct inspections, and apply enhanced due diligence for higher-risk clients.

MAS said it is conducting supervisory reviews of selected managers and urged all fund managers to review existing arrangements, close compliance gaps, and ensure VCCs meet regulatory requirements at all times.