MAS Circular IID 04/2025: Governance and Management of VCCs

What is Circular IID 04/2025?

On 26 June 2025 the Monetary Authority of Singapore (MAS) issued Circular IID 04/2025 to all fund managers — both Capital Markets Services (CMS) licence holders and exempt fund managers — on the governance and management of Variable Capital Companies (VCCs). It follows a 2024 thematic review built on VCC lodgements and a survey of managers. As of 31 March 2025 there were about 1,200 VCCs run by roughly 600 MAS-regulated financial institutions, the vast majority offered only to accredited and institutional investors.

The circular does not change the law. It restates the core requirements and, more importantly, signals where MAS found gaps in its review and where it will now supervise more closely.

The core requirements MAS restated

• A VCC is a collective investment scheme (CIS) in corporate form — VCC Act s.15(1).
• A MAS-regulated manager is mandatory. A VCC cannot be self-managed; it must appoint a manager regulated by MAS (licensed or exempt) to manage its property — VCC Act s.46.
• A director from the manager. At least one VCC director must be a director or qualified representative of the manager — VCC Act s.48(1)(b).
• An Eligible Financial Institution (EFI) for AML/CFT, appointed to perform the checks required under MAS Notice VCC-N01.
• Independent custody. The manager must segregate the VCC's assets and hold them with an independent custodian.

Four areas MAS is now watching

1. Custody arrangements

A small number of VCCs held assets such as listed equities and fixed income without reporting independent custody. MAS expects assets under management to be held in independent custody — the exception being private equity and venture capital investments offered only to accredited or institutional investors.

2. Manager and director appointments

Some VCCs appointed extra directors for oversight. Where those directors carry out regulated activities — deal sourcing, investment research, portfolio management, trade execution, or client-facing work like account servicing, business development and marketing — they must be appointed as licensed representatives of the VCC manager. Adding a director does not exempt them from licensing if they are doing regulated work.

3. Substantive fund management — the conduit warning

This is the observation with the widest reach. MAS found managers running VCCs that held no assets or had no investors more than a year after incorporation, and cases where a VCC merely held a single investor's pre-existing, illiquid assets. MAS's position: a manager who simply transfers an investor's existing assets into a VCC without providing investment input is not carrying out substantive fund management. A VCC manager is expected to be actively involved in portfolio construction, investment due diligence, analysis and risk management. A VCC manager should not:

• provide a conduit for clients to wrap assets as fund units without real input on their merits, suitability or performance;
• set up VCCs that merely on-sell funds managed by other managers; or
• purely market the VCCs.

VCCs that have sat with no assets and no investors for an extended period should be wound down.

4. AML/CFT ownership

A VCC remains responsible for its own AML/CFT obligations even though it appoints an EFI to run the checks. Its directors must exercise real oversight of the EFI's framework. The VCC must identify and verify its customers and their beneficial owners, keep an up-to-date beneficial-ownership register, screen, and apply enhanced due diligence to higher-risk customers — and produce that information to MAS or law enforcement on request. Directors and EFIs should receive regular ML/TF risk training. The obligations sit under MAS Notice VCC-N01 and the Variable Capital Companies (Sanctions and Freezing of Assets of Persons) Regulations 2020.

Who this matters most for

• Family offices and single-investor structures. Using a VCC to hold a family's existing assets with little active management is exactly the asset-parking conduit MAS flagged. A family-office VCC needs a manager doing genuine portfolio and risk work — not just a wrapper.
• Emerging managers on hosted platforms. If you launch as a sub-fund under a licensed platform manager, that manager must conduct substantive management and cannot be a pass-through for someone else's fund; the people doing the investing must be its appointed representatives.

What VCC managers should do now

• Confirm every VCC has independent custody where required.
• Check that everyone performing regulated activity for the VCC is an appointed representative of the manager.
• Be able to demonstrate substantive fund management — document portfolio decisions, due diligence and risk oversight.
• Wind down VCCs assessed as dormant and unviable.
• Evidence AML/CFT oversight of the EFI, the beneficial-ownership register and training.

MAS said it is conducting supervisory reviews of specific managers and will decide whether interventions or regulatory action are warranted — so this is a self-review every VCC manager should run now, not a box-ticking note. For the underlying framework, see the VCC Act 2018 explained and VCC governance and director requirements; for where this bites in practice, see why VCC setups stall.