Private banking onboarding for newly licensed CMS holders: Decision tree: should you choose this

Private banking onboarding for newly licensed CMS holders: Decision tree, should you choose this

Private banking onboarding for newly licensed CMS holders is the process by which a firm that has just obtained its Capital Markets Services (CMS) licence opens institutional and private banking relationships to hold client assets and execute transactions. Whether you pursue full private banking onboarding immediately, or sequence it after building a track record, depends on your licensed activities, client base and operational readiness. This decision tree sets out how to choose.

Step 1: What CMS-regulated activity does your licence actually cover?

A CMS licence under the Securities and Futures Act 2001 can cover different regulated activities: fund management, dealing in capital markets products, advising on corporate finance, or providing custodial services, among others. Private banks will structure onboarding differently depending on which activity you are licensed for; a fund manager needs custody and execution relationships, while a corporate finance adviser may only need a standard corporate account. Confirm your exact licence scope on the MAS Financial Institutions Directory before approaching any bank, since the bank’s onboarding team will check this as a first step.

Step 2: Do you need multiple prime brokerage relationships, or will one private bank suffice?

If your firm runs a single, relatively simple strategy with modest assets under management, one private banking relationship combining custody, execution and banking services may be sufficient at launch. If you run a multi-asset or leveraged strategy, you will likely need a dedicated prime brokerage relationship in addition to, or instead of, a private bank, since private banks typically cap leverage and product complexity more conservatively than institutional prime brokers. Newly licensed managers should honestly assess their strategy complexity here rather than over-engineering the banking structure before the first client is even onboarded.

Step 3: Can you meet the bank’s minimum AUM and track record expectations?

Most private banks in Singapore apply informal minimum thresholds for newly licensed CMS holders, commonly expecting a credible path to at least a few million Singapore dollars in assets under management within the first 12 to 24 months, plus a principal or key individual with a demonstrable track record at a recognised institution. If your firm cannot yet meet this bar, consider starting with a retail or commercial bank account for operational purposes while using an interim custodian or platform for client assets, and revisit full private banking onboarding once the track record and AUM are established.

Step 4: Is your compliance and AML/CFT framework ready for bank due diligence?

Private banks conduct extensive know-your-customer and source-of-funds due diligence on newly licensed CMS holders, mirroring their own obligations under MAS anti-money laundering notices. If your compliance manual, client onboarding procedures and beneficial ownership documentation are not yet finalised and tested, onboarding will stall at the bank’s compliance desk regardless of how strong your investment track record is. Firms should complete and pressure-test their AML/CFT framework before submitting a private banking application, not in parallel with it.

What it is and who it is for

This process is for newly licensed fund managers, family offices and other CMS holders that need institutional-grade banking, custody and execution relationships to actually operate, as distinct from the licensing process itself. It is not relevant to firms that only hold a representative’s licence to work under an existing licensed entity, since those individuals operate under their principal’s existing banking relationships.

Eligibility and requirements

Beyond AUM and track record, banks typically require: a valid CMS licence or licence exemption confirmation from MAS; a registered Singapore office address; appointed directors and key compliance personnel with disclosed regulatory history; a documented investment mandate or strategy; and professional indemnity insurance where applicable to the licensed activity. Banks will also request the firm’s constitution and register of shareholders to verify beneficial ownership down to natural persons.

Cost and timeline

Private banking onboarding for a newly licensed CMS holder typically takes 2 to 4 months from first application to a fully operational account, though complex ownership structures or source-of-wealth questions can extend this to 6 months or more. There is generally no account-opening fee as such, but banks will expect a minimum balance or minimum revenue commitment, commonly in the range of S$1,000,000 to S$5,000,000 in assets or committed trading volume depending on the bank’s segment. Legal and compliance advisory costs to prepare the onboarding pack (AML policy, source-of-funds documentation, mandate letters) typically range from S$10,000 to S$25,000 for a straightforward fund manager structure.

Step-by-step process

1. Confirm the exact scope of your CMS licence and the regulated activities it covers.
2. Decide, using Step 2 above, whether you need a private bank, a prime broker, or both.
3. Finalise and test your AML/CFT and client onboarding compliance framework internally.
4. Prepare the onboarding pack: corporate documents, beneficial ownership chart, investment mandate, source-of-funds evidence for principals and key clients.
5. Submit applications to two or three shortlisted banks in parallel, since approval timelines and risk appetite vary significantly between institutions.
6. Complete the bank’s own due diligence calls and site visits, then execute account opening and custody agreements.

Comparing private bank, prime broker and custodian routes

Newly licensed CMS holders often conflate three distinct types of institutional relationship, so it is worth separating them clearly.

• Private bank: suited to discretionary or advisory mandates with relatively liquid, long-only or modestly geared portfolios, bundling custody, execution, lending and relationship management into a single relationship. Onboarding is typically the fastest of the three for a straightforward strategy.
• Prime broker: suited to hedge fund style strategies using leverage, derivatives or short positions, offering margin financing and stock lending that most private banks will not extend to a newly licensed manager. Onboarding is generally more rigorous, with heavier scrutiny of the fund’s risk management framework.
• Independent custodian: suited to managers who want to keep execution broker-agnostic and avoid concentration risk, often used alongside a private bank or prime broker rather than instead of one. This route adds a layer of operational complexity but is increasingly expected by institutional allocators as a governance safeguard.

A newly licensed manager running a conventional long-only mandate for family office or high net worth clients will usually start with a private bank; a manager running a multi-strategy or derivatives-heavy book should expect to need a prime broker from day one, with a private bank relationship added later for client-facing convenience.

Preparing the beneficial ownership and source-of-funds narrative

One of the most time-consuming parts of onboarding is not the licence itself but the beneficial ownership and source-of-wealth narrative behind the firm’s principals and, where applicable, its anchor clients. Banks will trace ownership through any holding companies or trusts to natural persons, and will expect a coherent, documented explanation of how the principal accumulated the wealth being deployed or managed, consistent with MAS anti-money laundering and countering the financing of terrorism notices applicable to capital markets intermediaries. Firms that prepare this narrative, supported by audited accounts, prior employment records and bank statements, before the formal application is lodged generally move through due diligence noticeably faster than those who scramble to produce it mid-process.

Common mistakes

• Approaching private banks before the AML/CFT compliance framework is finished, which causes avoidable delay once due diligence begins.
• Applying to only one bank, which leaves the firm with no fallback if that bank’s risk committee declines or stalls the application.
• Underestimating the beneficial ownership disclosure required where the licensed entity has corporate or trust shareholders rather than natural persons.
• Assuming a private bank relationship removes the need for a separate custodian or prime broker when running a more complex or leveraged strategy.

FAQs

Do I need to be fully licensed before approaching a private bank?
Most banks require at least an in-principle approval or the actual CMS licence in hand before opening formal discussions, though preliminary relationship conversations can start earlier.

Can a licensed fund manager use a retail bank account instead of private banking?
Operationally yes for corporate expenses, but client assets under a fund management licence generally need to sit with a proper custodian or private bank offering appropriate safeguarding arrangements, not a standard retail account.

How many banking relationships should a newly licensed manager maintain?
Most newly licensed managers maintain at least two relationships, a primary bank or custodian and a backup, to manage concentration and operational risk.

Does MAS need to approve my choice of bank or custodian?
Not directly, but MAS expects the firm’s chosen custodial and banking arrangements to be disclosed and assessed as part of its ongoing risk management obligations under the licensing conditions.

What happens if a bank declines the onboarding application?
This is common for newly licensed firms and is not necessarily a reflection of licence validity; firms should address the specific reasons given (often AML documentation gaps or insufficient track record) and reapply or approach an alternative institution.

Related guides

For a detailed walkthrough of the practical onboarding steps, see our related article on Private banking onboarding for newly licensed CMS holders: Step-by-step walkthrough. Firms structuring their licensed entity may also find VCC Act 2018: Legal Personality and Membership Rules relevant where a fund vehicle structure is being considered, alongside Foreign Director vs Local Resident Director Requirements for a Singapore Pte Ltd for governance planning.

For the authoritative position on CMS licensing and banking due diligence expectations, consult the Monetary Authority of Singapore’s regulation portal. For the statutory basis of capital markets licensing, see the Securities and Futures Act 2001 on the Singapore Statutes Online database.

Need help with this? Call, SMS or WhatsApp +65 8501 7133, or email [email protected]. Raffles Corporate Services works with a panel of corporate and employment law firms; this article is general information, not legal advice.