MAS loosens restriction for employees investing in their own fund
7 August 2018
The MAS has confirmed that “Investment Professionals” who don’t fall within MAS’ definition of an Accredited Investor (A/I) can invest in their employer’s funds. Previously, only employees meeting the A/I thresholds were able to invest. Although some have suggested that the changes don’t go far enough (due to tight definition of Investment Professionals), they are nonetheless welcome as they enable defined employees to have ‘skin in the game’ and for their interests to be more aligned with those of their employer.
The change is set out in the July 2018 update to the MAS’ Guidelines on Licensing, Registration and Conduct of Business for Fund Management Companies (FMCs). Employees of FMCs that are permitted to deal only with A/Is, and Institutional Investors could previously only invest into the fund if they were A/Is. Now, non- accredited investor employees who are Investment Professionals can invest. Investment Professionals are persons who perform portfolio management, research or dealing functions. Individuals with roles in the middle and back office are not considered as Investment Professionals.
Accredited Investor FMCs that permit Investment Professionals who are not A/Is to invest in their fund must have the following safeguards in place:
- maintain records of Investment Professionals who have invested
- ensure that the participation is strictly voluntary
- apprise the Investment Professional of the risks involved, and obtain in writing an acknowledgement that the employee will not be accorded the same regulatory safeguards as a retail investor in relation to their investment
In the event that the Investment Professional ceases employment with the FMC, no further investments are allowed. FMCs must have a clear policy regarding the treatment or handling of Investment Professionals’ investments, including decisions upon cessation of their employment. This must be agreed on and acknowledged prior to the investment taking place.
How Bovill can help
We can help to review and embed processes with respect to Employee Dealing and Personal Account Dealing.