THE short answer is, yes, a Madoff mega-scandal could happen in the fund management industry here, but the strict oversight minimises the risk, say industry watchers.

Yet while safeguards can be tight and regulators vigilant, the unthinkable can still happen when it comes to fraud.

Wall Street money manager Bernard Madoff's business came under the purview of the US Securities and Exchange Commission - and yet the country's top watchdog appeared to have no clue that one of history's greatest Ponzi schemes was underway.

Such schemes involve investors being paid off with the investments of newer clients.

And scams do happen in Singapore.

In the widely-publicised Gemini Chit Fund scandal in the 1970s, more than 40,000 people, who were members of the chit fund, lost an estimated $50 million after they were promised high returns on their investment.

Today, Singapore's Securities and Futures Act calls for a single Capital Markets Services licence that covers the various regulated activities like stock and futures trading, fund management and custodial services.

You must fulfil certain requirements before a fund management firm gets the okay.

There are various criteria to meet, including a stipulated minimum assets under management, a minimum base capital requirement that varies according to the activity you deal with, as well a proven track record.

For instance, applicants hoping to carry out the regulated activity of fund management - other than those in the boutique category - need global funds under management of at least $1 billion.

Even boutique fund managers must have at least $100 million of funds under management, in Singapore or elsewhere. Additionally, the boutique firm must employ at least two fund managers, at least one of whom must be a substantial shareholder.

While it is hard to compare regulations across different jurisdictions, Singapore's strict asset and capital base requirements for fund managers mean it is generally harder to launch a retail fund here than in the United States or Hong Kong, a hedge fund manager said.

'In Hong Kong, bankers can, after working in investment banking for several years, go about starting a proliferation of funds in the retail space,' he said.

There are other checks and balances in place to ensure no one man can run such a massive scam as the one Mr Madoff pulled off for so many years.

'The [Monetary Authority of Singapore] conducts on-site inspections. They'll go through our operations and look through our internal procedures. We also have internal and external auditors,' a local fund manager said.

He said the MAS inspects fund management firms as often as twice a year.

Read the full story in Wednesday's edition of The Straits Times.