By Philippa Allen , Head of Sales, Regulatory Compliance, Strategic Relationships, EMEA, Japan and India
Asia-Pacific (APAC) has become an integral component of U.S. asset managers’ global investment strategies – offering portfolio diversification, differentiated sector exposure, and access to some of the world’s most active and evolving public markets.
U.S. managers seeking to harness APAC capital development and growth opportunities may operate from offshore using local third parties, or they may choose to establish a local presence. The latter becomes necessary when activities conducted on the ground extend beyond passive or support functions to encompass the likes of investment management, strategic decision-making or sustained client-facing activity.
With local presence comes regulatory requirements. Of course, APAC is not a single market, so entry mechanisms and compliance obligations vary by jurisdiction. In this article, we delve into the specific regulatory and structural requirements of the key markets of Hong Kong, Singapore and Japan.
Entering Hong Kong
Foreign fund managers must establish a local subsidiary in Hong Kong and obtain a license from the Securities and Futures Commission (SFC) for Type 9 (asset management). An additional Type 1 (dealing in securities) license is needed for marketing activities.
Most fund managers elect to take conditions to only manage funds or discretionary accounts for non-retail investors with independent custody arrangements, which reduces the local regulatory burden.
An approval from the SFC is required rather than a notification, but the SFC is one of the fastest regulators in APAC, usually taking a maximum of six months to approve new fund managers.
The SFC will consider the nature of the proposed activities, the operational organization, human resources and investor type, but it’s largely neutral on investment strategy with a separate regime for the licensing of virtual asset managers.
Requirements for entry
Key structural requirements include:
- Paid-up capital of HK$150,000 with a minimum liquid capital amount of HK$100,000
- At least two SFC-authorized responsible officers (ROs), one of whom must be fully competent and resident in Hong Kong
- An appropriate office and an operating bank account for the company
- Documented risk and compliance policies and procedures
- Investment staff must be licensed (the SFC recognizes a broad range of local and overseas experience as relevant industry experience) and must be fit and proper
- Managers in Charge (MIC) must be appointed internally for key support functions such as finance, IT and compliance. They must be fit and proper and disclosed to the SFC, even if they’re overseas and not directly regulated. In small firms, these roles can be double-hatted and split between the ROs
- Individuals entering the financial industry in Hong Kong are required to pass examinations prior to licensing, although certain exemptions for senior staff can be obtained
Notably, while firms must name an internal MIC of Compliance, they can still outsource their compliance function to a suitably experienced consulting firm.
Ongoing regulatory obligations
Ongoing regulatory obligations include SFC filings such as semi-annual financial returns, the appointment of an auditor for the Hong Kong subsidiary and the filing of the audited accounts and notifications of structural and personnel changes.
Firms investing in Hong Kong must also report short sales, short position holdings, substantial shareholdings and stock options and futures positions to the HKEX.
Managers must implement a compliance program, including:
- A Code of Ethics governing personal account dealing, conflicts, gifts, anti-bribery and handling of material non-public information (MNPI)
- A continuous professional training arrangement for employees
- Procedures for the proper identification of and interaction with professional investors, for marketing compliance (including product and investor suitability), and for anti-money laundering (AML) and customer due diligence (CDD) obligations
- Risk management processes covering operational, liquidity, technology and cyber risk as well as business continuity planning (BCP)
These requirements are similar to those of the U.S. and UK, and global monitoring programs and policies/procedures are usually adopted with only minor local adaptations. The SFC operates a comprehensive inspection program much like the U.S. Securities and Exchange Commission (SEC).
Personal and corporate tax
Hong Kong has a simple personal and corporate tax system with a profits tax exemption for funds (including pension endowment and single investor funds) applicable across a broad range of qualifying investments.
There’s no profits tax on qualifying carried interest and previously onerous conditions are being relaxed to allow profits from digital assets, precious metals, commodities and private credit / loan investment to also qualify for the exemption.
Personal tax rates are low, with a number of statutory deductible allowances. There is no sales tax in Hong Kong.
Personal data protection
Personal data protection requirements in Hong Kong are in line with developed markets and data transfer can occur with consent.
Hong Kong does not operate within any internet firewalls and information-sharing between the SFC and Mainland China regulators is via an inter-government memorandum of understanding – as specified by the International Organization of Securities Commissions (IOSCO) – and must be based on specific needs, such as pursuing an enforcement action.
Entering Singapore
Companies wishing to conduct fund management activities in Singapore are required by its Securities and Futures Act to be licensed with the Monetary Authority of Singapore (MAS) as a retail fund manager, a licensed fund management company (LFMC), or a venture capital fund manager (VCFM).
LFMCs and VCFMs are restricted to dealing with institutional and accredited investors only and make up the bulk of market participants. The VCFM regime is largely to support investment in Singapore-domiciled venture capital, so the following analysis focuses on LFMCs.
Processing time for licenses is around eight months on the proviso that the application is for substantive fund management activities in Singapore and not primarily for marketing or capital-raising (which requires a different license).
Managers of digital assets are in scope of licensing, but crypto funds must demonstrate genuine fund management activity and not merely be acting as a conduit for offshore decisions or be a token wrapper vehicle.
Requirements for entry
Key structural requirements include:
- A subsidiary incorporated in Singapore with base capital of S$150,000 and financial resources of at least 120% of the firm’s operational risk requirement
- A suitable office and operating bank account for the company
- At least two directors with five years’ relevant experience, one of whom must be the CEO and permanently resident in Singapore
- Two MAS-appointed representatives with at least five years’ relevant experience, who can be the directors if suitably qualified. (Most firms require three or four staff to launch)
- A full-time compliance officer if more than $1B of assets under management (AUM) is managed from Singapore; otherwise, the function can be outsourced
- A formal written risk management framework
Internal audit arrangements can be outsourced if firms do not have internal audit functions. There are no exam requirements for staff of an LFMC.
Ongoing regulatory obligations
Ongoing regulatory obligations include MAS quarterly and annual returns, the appointment of an external auditor for the Singapore subsidiary, and the filing of the audited accounts and notifications of structural and personnel changes.
All fund managers must submit a basic Quarterly Fund Data Collection (QDC) return, which includes reporting of AUM and the number of investors at company level. Managers of any fund or segregated mandate of S$500M or more must submit a full QDC for each fund or mandate with a detailed breakdown of investment exposures, asset classes and geographic allocation.
Managers must implement a compliance program, including:
- Monitoring of conflicts, gifts, anti-bribery and handling of MNPI
- Procedures for the proper identification of and interaction with institutional and accredited investors, for marketing compliance (including product and investor suitability), and for outsourcing compliance
- Risk management processes encompassing operational, liquidity, technology and cyber risk as well as BCP
- Stringent fulfilment of AML and CDD obligations
Requirements are similar to those of the U.S. and UK, and global monitoring programs and policies/procedures can be used with minor local adaptations.
Personal and corporate tax
Singapore also benefits from a simple and low personal and corporate tax system, further enhanced by multiple schemes to encourage the development of the fund management industry.
The Offshore Fund Scheme exempts specified income from designated investments sourced in Singapore from trading gains and remittances, which are usually taxable by Singapore tax resident companies. Meanwhile, the Goods and Services Tax (GST) Remission Scheme provides relief to Singapore-based funds if they’re unable to claim GST incurred on goods or services under the normal GST rules. No approvals are required to use these schemes.
For the Resident Fund Scheme and the Enhanced Tier Scheme, which have a variety of requirements to meet, MAS approval is required. Approval is based on the projected growth of the company and the substance being brought by the company to Singapore.
Entering Japan
Under Japan’s Financial Instruments and Exchange Act (FIEA), managers of funds or discretionary accounts must register as a Financial Instruments Business Operator (FIBO) with the Financial Services Agency (FSA).
To perform discretionary investment management for funds or separately managed account (SMA) mandates, a foreign manager must register for Investment Management Business (IMB) status – usually referred to as a DIM license.
If activity in Japan is limited to acting as an intermediary offering nondiscretionary advice or introduction activities connecting qualified investors with fully licensed fund managers, an Investment Advisory and Agency Business Operator (IAABO) license is required, but there are operational constraints on how this business is conducted.
These licenses do not permit solicitation or marketing activities, which require broker-dealer licenses. Foreign managers wishing to also conduct such activities must appoint onshore third-party marketers.
Some changes to the regulatory regime have been introduced in response to foreign fund managers’ concerns about the difficulty of establishing in Japan, including adjustments to regulatory, immigration and tax rules to make market entry faster and more predictable. A Financial Market Entry Office has been created, which offers guidance, accepts registration applications and provides ongoing reporting of most items in English. However, the Kanto Local Finance Bureau (KLFB), which approves licenses, does not operate in English, so Japanese versions are still required.
Foreign entrants may receive up to ¥20 million to help cover initial office rent, hiring costs, registration expenses and visa application fees, but applications must made to a set timeline and the lengthy processing time to obtain approval from the KLFB means that first- and second-year operating costs for fund managers are often high.
A lighter “Pro-DIM” license has also been created to provide relaxed requirements for managers. This serves only qualified institutional investors and certain high-net-worth individuals, but the total AUM must remain below ¥20 billion (approximately $150M).
Requirements for entry
Managers must first submit a concept paper to the KLFB demonstrating that they have:
- Organizational capability, adequate governance, compliance arrangements, internal controls and an AML/CTF framework
- Qualified staff, meaning fit-and-proper individuals including directors with required experience (i.e. proper licensing)
- Sufficient capital and net assets for the business type
- Risk management systems for valuation, NAV error policies, and internal audits
Once the concept paper is submitted, the formal application is filed, accompanied by the official (and lengthy) Japanese-language Business Operating Methodology documents, which are the prevailing governance and control documents for FSA purposes but which foreign managers usually supplement with a local compliance manual to ensure that global compliance requirements are also met.
Ongoing compliance obligations
Once registered, managers will have the following reporting requirements:
- Annual business filings within three months of fiscal year-end
- Quarterly investment fraud reports
- Special business notifications applicable to qualified institutional investor (QII) managers
- Article 63 notifications in respect of limited partners
Starting in April 2026, the Japan Asset Management Association will oversee investment management companies and update self-regulatory rules. Most investment management members, investment advisory and agency business operators will join the association.
Expand into APAC with confidence – with help from IQ-EQ
If you’re considering a regulated buildout in Hong Kong, Singapore or Japan, early structuring decisions can meaningfully impact cost, speed to market, and long-term flexibility.
At IQ-EQ, we work with U.S. asset managers at every stage of their APAC journey, helping translate strategy into practical operating and regulatory solutions. Contact our experienced team today to find out more.
Want more info on the merits of the APAC market? Read Christina Shalhoub’s article to discover why APAC – in particular Hong Kong, Singapore and Japan – is so compelling for U.S. managers.
