New Public Offer Provisions to Enhance Disclosure and Develop Capital Markets to Commence on 1 July 2002
Singapore 23 May 2002. In another step towards keeping Singapore's capital markets up-to-date and relevant, the Monetary Authority of Singapore (MAS) today issued new regulations on offers of shares, debentures and collective investment schemes (CIS) under the omnibus Securities and Futures Act (SFA). The regulations are aimed at enhancing disclosure in public offer documents and marketing material, and enabling a greater variety of investment products to be offered to Singapore investors.
2 The SFA was passed by Parliament in October 2001. MAS has been implementing the new legislation in stages. The first stage included Part VIII on Take-over Offers, which came into operation on 1 January 2002. The current second stage, which will come into operation on 1 July 2002, includes Part XIII which brings together the provisions on offers of shares, debentures and CIS previously in the Companies Act, and a new Code on CIS.
3 Prospectus Registration Process: To raise the standard of prospectus disclosure, the procedures for registering prospectuses have been revised. Prospectuses lodged with MAS will be subject to a minimum two-week holding period and posted on OPERA (Offers and Prospectuses Electronic Repository and Access), a new database to be launched on the MAS web-site. The public will be able to use OPERA to search for, view and comment on offer documents lodged with MAS. All public comments received will be kept confidential. There will be safeguards in place to discourage frivolous comments. MAS may refuse to register a prospectus if it does not satisfy the disclosure requirements or if its registration is not in the public interest.
4 Stop Orders: As a further safeguard, if a prospectus is found to be misleading or deficient after it has been registered, MAS can serve a stop order on the prospectus to prevent further issuance or sale of securities to the public.
5 Return of Monies: For offers of shares and debentures, once a prospectus is stopped or if an issuer lodges a supplementary or replacement prospectus to incorporate omitted information or correct any misleading information in an earlier prospectus, investors are entitled to withdraw their applications and obtain refunds on their monies had they bought or subscribed for securities based on the defective prospectus. Similarly, where a CIS prospectus is stopped, investors are entitled to withdraw their applications and obtain refunds on their monies if subscription monies have not yet been invested.
6 Disclosure Requirements: Among the new regulations issued today are updated prospectus checklists. These checklists guide issuers and practitioners on what information must be disclosed, in addition to the general disclosure test in the SFA which requires a prospectus to contain all the information that an investor would reasonably need in order to make an informed decision on an investment.
7 There are separate checklists for shares and debentures in recognition of the different investment risks that such instruments pose. For debenture issues, the amount of historical financial information required in the prospectus has been reduced, focusing on the issuer's ability to meet its financial obligations. Prospectuses for securities that will be listed and traded on a securities exchange are subject to more exacting standards than for unlisted securities because listed securities tend to be offered to a wider group of investors.
8 The checklist for CIS prospectuses has been revised to make it more user-friendly. Items which are necessary for making an investment decision such as the investment objective and specific investment risks of a fund as well as fees and charges, which were administrative requirements previously, are now required under the regulations. New requirements such as the track record of the manager and, where applicable, information on the past performance of a fund have been added.
9 Advertising Regulations: The advertising regulations for CIS have been augmented to prevent false and misleading advertisements. The new provisions include detailed requirements on how past performance of a fund, if included in an advertisement, should be presented. Projections of future fund performance continue to be prohibited. To prevent important information from being hidden in fine print, advertisements must comply with specified criteria on legibility and font size.
GREATER VARIETY OF INVESTMENT PRODUCTS
10 Bond Issues: To encourage bond issuance in Singapore, the new regulations will allow an issuer to make multiple offers under a debenture issuance programme, provided the issuer registers with MAS a base prospectus that is applicable for the entire programme. For each subsequent offer of debentures under the programme, the issuer would need to register only a brief pricing statement containing information specific to that particular offer without having to re-register the base prospectus. This will reduce cost for debenture issuers and allow them to raise funds more quickly.
11 Foreign Funds or CIS: Previously, foreign funds may be offered in Singapore only through a feeder fund structure, i.e. a Singapore fund is set up to invest in the units of the foreign fund. Under the SFA, fund managers have an additional option for foreign funds to be offered directly to the public, instead of only through feeder funds, which entail additional costs. As is the case for local funds, offerors of foreign funds have to obtain MAS' prior approval. To safeguard investors' interests, the offeror must register a foreign company in Singapore and appoint a representative to act as a liaison between investors and the foreign offeror. Further, MAS will allow a foreign fund to be offered directly in Singapore only if the fund and its manager are regulated in a jurisdiction with high regulatory standards.
12 Offers of CIS to Sophisticated Investors: The SFA differentiates between offers of CIS to retail and sophisticated investors, as it does for offers of shares and debentures. Offers to sophisticated investors will be subject to less stringent requirements. To be approved by MAS, such offers must satisfy only two criteria: the manager must be licensed and be "fit and proper". (For Singapore unit trusts, an approved trustee has to be appointed as well.) The funds do not have to be invested in accordance with the investment guidelines in the Code on Collective Investment Schemes.
13 Trustee Requirements: The regulations also set out the financial requirements for trustees of CIS as a further protection for investors. Besides a paid-up capital of $1 million, MAS may require a trustee to either take up professional indemnity insurance to cover claims that may arise from its business as a trustee of CIS, or furnish MAS with a letter of undertaking from its holding company to meet any claims against it.
Note to Editors:
Parliament passed the SFA in October 2001. MAS has been implementing the new legislation in stages. Part I (Preliminary), Part VIII (Securities Industry Council and Take-over Offers), Part IX (Supervision and Investigation), Part X (Assistance to Foreign Regulatory Authorities) and Part XV (Miscellaneous; except sections 314 and 342(1) and (3)) came into effect on 1 Jan 2002.
With Part XIII commencing on 1 July 2002, the remaining Part II (Markets), Part III (Clearing Facilities), Part IV (Capital Markets Services Licence and Representative?s Licence), Part V (Books, Customer Assets and Audit), Part VI (Conduct of Business), Part VII (Disclosure of Interests), Part XI (Investor Compensation Scheme), Part XII (Market Conduct), Part XIV (Appeals) and sections 314 and 342(1) and (3), along with the regulations/subsidiary instruments that are now being drafted, will be implemented by the third quarter of this year.