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Marketing Funds:Raising capital in the US and Singapore
Ed O’BreeHead of Funds and BrokingBovill Ltd
September 2016
Jennifer HoopesGeneral Counsel and Head of GlobalForeside
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Ed O’BreeHead of Funds and BrokingBovill Ltd
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Singapore: the landscape
Insurance centre
Family Offices
Regional hub
Sovereign Wealth
Institutional capital
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Marketing Restrictions
· General prohibition
· Five most common exemptions:
- Registered prospectus (retail)
- Small offers exemption
- Private placement exemption
- S.304 (institutional investors)
- S.305 (accredited investors)
· Reverse solicitation
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Institutional investor exemption
· S.304 SFA
· Relatively narrow definition of institutional investor
· No need to register the fund with MAS
· Regulatory disclosures required on promotional material
But, definition changing imminently
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Institutional investors: consultation definition
· Singapore government
· Sovereign wealth funds
· Non-Singapore central governments
· Banks
· Finance companies
· Insurance companies
· Licenced trust companies
· Holders of capital markets services licences
· Pension funds and collective investment schemes
· Certain bond dealers
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The “305 exemption”
· Two categories of investors:
- Those investing S$200,000 as principal
- Accredited investors
· Fund must be recorded on the MAS list of restricted schemes
· Offering memorandum
· Two restrictions:
- No advertising permitted
- Not if prospectus is registered
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Accredited investors (s.305)
• with net personal assets of S$2m• with net financial assets of S$1m• with annual income of S$300k
• (other than LLP) where each Partners is an A.I.
• (or similar) with net assets of S$10m• where all shareholders are A.I.s
Individuals
Partnership
Corporations
• of a trust where trust property is S$10m• of a trust where all beneficiaries are A/Is• of a trust where all settlors are A.I.s
Trustees
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Registering restricted foreign schemes
· There are 5,000+ schemes on the MAS List of Restricted Schemes:
1: Fund Manager must be licenced / registered for fund management in its home country.
2: Information Memorandum, with disclosures, submitted to MAS
3: Electronic application submitted by the fund, its manager or agent.
4: Annual declaration is submitted by the Responsible Person or their agent. Initial registration fee: S$250.
· Annual fee: S$50
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Private Banks
• Slow moving• High charges
Singapore IFAs
• Access to HNWIs• Networks not so developed• Initial charges of up to 4%
Introducers
• Institutional capital• Niche operators• Up to 20% of AMC and performance fee
Third party distribution
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Promoting your own fund
· Like the UK, promoting in itself is not a regulated activity
· May need a licence or registration
· If setting up a Singapore entity:
- Base capital S$250,000
- 1 x SG director
- Proportionate compliance function
- Fees
· On balance, unlikely to be necessary
· Good for family office networks
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Jennifer HoopesGeneral Counsel and Head of GlobalForeside
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Accessing the U.S. Marketfor Non-U.S. Investment Managers
September 29, 2016
Portland, ME – Philadelphia, PA – Boston, MA – Columbus, OH
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Overview
• Accessing the U.S. Market• Products
• UCITS/SICAVs• U.S. Registered Funds
(mutual funds or ETFs)• Non-Registered Funds
• Distribution Options• Advantages and
Disadvantages• Regulatory Issues
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Products – UCITS/SICAVs
• Offerings to the NRA/NRC (non-resident alien/non-resident client) market.
• Generally offered through large U.S. broker-dealers (Pershing, Morgan Stanley, Merrill Lynch).
• Need connectivity through the NSCC (National Securities Clearing Corporation), a subsidiary of the DTCC.
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Products – Registered Funds
• Mutual Funds• Series Trust (established
structure and service providers)• Stand-Alone
• Exchange Traded Funds (ETF)• Series (reliance on existing
SEC Exemptive Relief)• Stand-Alone (need to obtain
SEC Exemptive Relief)
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Products – Registered Funds
• Register as Investment Adviser• Establish Board of Directors• Identify Service Providers:
• Transfer Agent• Custodian• Administrator• Principal Underwriter• Fund Counsel• Trustee Counsel• Audit Firm
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Products – Non-Registered Funds
• Offered pursuant to Regulation D to “Accredited Investors”
• Subject to the Investment Company Act of 1940 and relevant exemptions
• Registration as a Investment Adviser (exemptions and limited registrations possible)
• Offering documents best practice, not required
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Distribution Options – Regulatory Structure
• Generally, you must be registered as (or with) a U.S. broker-dealer or exempt from registration if you are marketing securities in the U.S.
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Distribution Options – Overview
• Issuer Exemption• Chaperoning (SEC Rule 15a-6)• Hire a third-party marketing firm• Build internal distribution function
– register sales people with U.S. broker-dealer
• Establish proprietary U.S. broker-dealer
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Distribution Options – Exemptions
• Issuer Exemption• Difficult to meet all
requirements of exemption• If transaction-based
compensation, cannot use this exemption
• 15a-6 Exemption: Chaperoning• Limited marketing to certain
types of institutional investors
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Distribution Options – Third Party Firms
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Advantages• Established sales staff
and channels• Manager does not need to
register as a broker-dealer• Third party firm
responsible for compliance with U.S. regulations
Use of a Third-Party Marketing Firm
Disadvantages• Cost – generally % of
AUM• Internal sales staff cannot
get compensated• Relying on third party firm
to tell your story
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Distribution Options – Internal Sales Force
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Advantages• Your sales force does the
selling• Sales force can get
compensated• Broker-dealer responsible
for compliance with U.S. regulations
Build an Internal Sales Force, registered with U.S. Broker-Dealer
Disadvantages• Sales people need to take
FINRA exams to be registered
• Cost – generally flat and/or per representative fee
• Manager cannot get any portion of compensation
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Distribution Options – Proprietary Broker-Dealer
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Advantages• Your sales force does the
selling• Sales force can get
compensated• You control your own
destiny
Establish Proprietary Broker-Dealer
Disadvantages• Cost – registration and
operating costs• Required to have certain
principals, annual audit, compliance program
• Lengthy registration and approval process (9-12 months)
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Conclusion
Tremendous opportunities to access the U.S. market with registered and unregistered funds.
Compliance with the regulatory regime is critical to your success.
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Foreside Financial Group, LLCThree Canal Plaza
Portland, ME 04101
Jennifer Hoopes+1 (207) 553-7138
www.foreside.com
Contact Information
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Questions?