Requirements and procedures for obtaining an asset management license

Trust management is a service provided by financial institutions or management companies in the stock, commodity and currency markets. Under a trust management agreement, the client transfers money or other assets to the managing party. The firm carries out transactions on its own behalf, but exclusively in the interests of the client, for which it receives remuneration in the form of a percentage of the income received or as a percentage of the price of assets under management. Below we will consider the main points regarding obtaining asset management license and all the subtleties that are associated with this procedure.

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Understanding Asset Management License Requirements

Asset management is a financial service. For many jurisdictions, there is a uniform rule that any financial institution has the right to provide services after being included in the Register and receiving a Certificate and the corresponding license for asset management. The company is created in the form of a joint stock company or limited liability company and operates in accordance with the requirements of local legislation of the selected jurisdiction, taking into account the features provided by the Law on Joint Investment Institutions and regulations of the state securities commission, if there is one in the country.

According to regulatory procedures, such firms must comply with all regulatory parameters provided by the local supervisory authority. Regulation of joint investment activities is carried out by the state and the self-regulatory organization of professional stock market participants – an association of stock market participants who carry out professional activities in the stock market to manage the assets of institutional investors. Of course, the nature and structure of the controlling element depends on the specific market space chosen.

Documentation and Application Process: Challenges and Best Practices

Procedure for obtaining the appropriate permit is as next-mentioned.

1. Preparation of a business plan and forecast of financial flows.
2. Development of internal policies, guidelines and instructions for the activities of the investment fund, carrying out KYC of all key persons.
3. Submitting documents to regulatory authorities, conducting interviews with all executives, awaiting comments and obtaining formal approval of the application.
4. Registering a company, obtaining permission and concluding an office lease.
5. Implementation of effective compliance and due diligence.
6. Opening a bank account, depositing authorized capital and obtaining regulatory approval.
7. Concluding a professional liability insurance contract and appointing specialists.

Thus, to summarize, we can say that the general procedure for obtaining this type of permission includes next-mentioned steps.

1. Preparation of documentation. Prepare all necessary documentation, including business plans, financial statements, infrastructure and other required documents.
2. Filing an application. Apply for a license to the appropriate regulatory authority.
3. Financial assessment. The regulator makes a financial assessment of your company.
4. Passport details. Indicate the passport details and qualifications of the personnel carrying out fund activities.
5. Review and observation. The regulatory body inspects your company and grants a license if all requirements are met.

If we’re talking about challenges and best practices, we should mention that to successfully complete the permitting and regulatory approval process, it is necessary to obtain professional assistance in the following aspects.

1. Business model analysis and advice on the applicable regulatory framework.
2. Preparation of a business plan and preparation of comprehensive financial forecasts.
3. Preparation of all necessary policies, processes and guidelines;
4. Providing the services of an outsourced compliance officer and an outsourced financial control officer.
5. Completion of the legal structure, including the creation of a holding company, development and adaptation of memorandums.
6. Assistance in renting premises, opening a bank account and obtaining permission to provide financial services.

Thus, taking into account the requirements of current global legislation and the parameters of each individual jurisdiction, in order to operate as a manager, it is necessary to register an individual entrepreneur or LLC. To obtain a permit, you must pay a license fee and provide a complete package of documents, including constituent and registration papers for the legal entity. It is also necessary to ensure the availability of own funds in the amount established by the regulator.

A license to professionally operate in the stock market is key for participants in this market, ensuring legal admissibility and stability in transactions with securities. A legal entity can also create a separate division that manages the assets of institutional investors, including outside the chosen jurisdiction, in agreement with the national commission and on the basis of the received permission, subject to compliance with the requirements for separate divisions of the licensee.

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Article’s author is Denys Chernyshov – founder and CEO of the globally-famous organization Eternity Law International.