Background

On 26 June 2025, the Monetary Authority of Singapore set out additional supervisory expectations and good practices relating to the governance and management of Variable Capital Companies after recent thematic inspections.

Key Observations
MAS noted several compliance gaps across VCC structures and operations. These included:

• Custody arrangements: Some VCC sub-funds holding listed securities did not appoint custodians, in breach of regulatory requirements.
• Fund manager and director roles: Some VCCs appointed additional independent directors to strengthen corporate governance. However, if these directors engage in regulated activities, they must be appointed as licensed representatives.
• Substantive fund management activity: A number of VCCs lacked genuine fund management activity and served as structured vehicles with little economic purpose.
• AML/CFT oversight: Responsibility of fulfilment of AML/CFT obligations still lies within the VCC, even if such functions were outsourced to eligible financial institutions.

Regulatory Expectations
MAS emphasised that:

• Fund managers and directors are responsible for ensuring full compliance with fund governance, substance, and AML/CFT controls.
• Directors involved in regulated activities must be formally appointed and supervised.
• VCCs must maintain operational substance as collective investment schemes and not shell structures.
• Delegation of AML/CFT obligations does not absolve oversight responsibilities by VCCs.

What’s Next?

• MAS can be expected to continue to actively engage with selected fund managers for supervisory reviews.
• VCC managers are to review their VCC arrangements to ensure that these VCCs perform substantive fund management activities.

How Can We Help?

Capital Governance assists fund managers by:

• Reviewing governance and licensing arrangements under the Variable Capital Company framework;
• Advising on the closure or restructuring of inactive or non-substantive fund vehicles;
• Strengthening anti-money laundering and countering the financing of terrorism processes, including oversight of eligible financial institutions.

Contact Us today to discuss how we can provide the risk and compliance advisory solutions for you. Find out more here.