final and v3 marketing funds in the us and singapore

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

Ed O’BreeHead of Funds and BrokingBovill Ltd

3

Singapore: the landscape

Insurance centre

Family Offices

Regional hub

Sovereign Wealth

Institutional capital

4

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

5

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

6

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

7

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

8

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

9

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

10

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

11

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

Our integrity.Our guidance.Your success.

12

Jennifer HoopesGeneral Counsel and Head of GlobalForeside

Accessing the U.S. Marketfor Non-U.S. Investment Managers

September 29, 2016

Portland, ME – Philadelphia, PA – Boston, MA – Columbus, OH

Our integrity.Our guidance.Your success.

14

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

Our integrity.Our guidance.Your success.

15

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.

Our integrity.Our guidance.Your success.

16

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)

Our integrity.Our guidance.Your success.

17

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

Our integrity.Our guidance.Your success.

18

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

Our integrity.Our guidance.Your success.

19

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.

Our integrity.Our guidance.Your success.

20

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

Our integrity.Our guidance.Your success.

21

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

Distribution Options – Third Party Firms

22

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

Distribution Options – Internal Sales Force

23

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

Distribution Options – Proprietary Broker-Dealer

24

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)

Our integrity.Our guidance.Your success.

25

Conclusion

Tremendous opportunities to access the U.S. market with registered and unregistered funds.

Compliance with the regulatory regime is critical to your success.

Our integrity.Our guidance.Your success.

26

Foreside Financial Group, LLCThree Canal Plaza

Portland, ME 04101

Jennifer Hoopes+1 (207) 553-7138

jhoopes@foreside.com

www.foreside.com

Contact Information

27

Questions?