Published Date: 01 September 2004

The Securities and Futures (Amendment) Bill 2004 Second Reading Speech by Mr Tharman Shanmugaratnam, Minister for Education and Deputy Chairman, Monetary Authority of Singapore

Mr Speaker Sir, I beg to move that the Bill be now read a second time.

2   The Securities and Futures Act (SFA) was passed in October 2001.  In September 2003, the SFA was amended to implement some of the recommendations of the Company Legislation and Regulatory Framework Committee (CLRF Committee).  The second phase of amendments, targeted for first reading in October 2004, will give effect to the remaining recommendations of the CLRF Committee which the Government has accepted.

3   Prior to this second phase, we are amending the SFA concurrent with the new legislation which Parliament has just passed, which provides for a new business trust structure in Singapore.  The SFA amendments will provide for the regulation of offers of units and derivatives of units in business trusts and take-over proceedings for business trusts. 

4   The Monetary Authority of Singapore (MAS) invited feedback from the industry and the public on the draft Bill in December 2003.  MAS has posted on its website its detailed responses to the comments received during this consultation.

5   Mr Speaker Sir, I will now go through the main provisions in the Bill.

Regulation of Offers of Units and Derivatives of Units in Business Trusts

6   The Bill introduces a new Division 1A in Part XIII of the SFA to regulate the public offers of units and derivatives of units in business trusts in the same way as offers of shares in corporations.  The intention is to enable investors to make informed investment decisions by requiring all material information relating to the business trust to be set out in the prospectus. Investors will also have the same statutory protections that subscribers to share offers have.

7   Registration of business trusts under the Business Trusts Bill will be voluntary.  However, section 282C(1)(a) of the Bill will require business trusts offered to retail investors to be registered under the Business Trusts Bill and therefore subject to a governance framework which seeks to safeguard investors' rights and establish the duties and accountability of trustees and their directors.

Amendment to the Definition of Securities

8   The definition of "securities" in the SFA will be amended to include units and derivatives of units in a business trust so that the provisions under the SFA relating to securities will also apply to business trusts, including provisions relating to market conduct. With the amendment to the definition of "securities", financial advice provided in relation to units and derivatives of units in a business trust will also be regulated under the Financial Advisers Act[1].

Regulation of Take-Over Proceedings for Business Trusts

9   The definition of "take-over offer" in the SFA will be amended so that take-over offers for units in business trusts will be subject to the relevant provisions under the SFA and the Singapore Code on Take-overs and Mergers.  This is to ensure a fair and orderly market for take-overs of business trusts.

Regulatory Treatment of Property Trusts

10   Property trusts or Real Estate Investment Trusts (REITs), as they are more commonly known, are currently regulated as collective investment schemes (CIS) under the SFA.  Property trusts fall within both the CIS and business trust regimes.  Rather than prescribe a specific approach, the Bill will allow a listed property trust to choose to be structured and regulated as either a CIS or a business trust. To avoid confusion to investors, any property trust regulated as a business trust will be prohibited from being referred to as a "Real Estate Investment Trust".


11   In conclusion, the capital markets are constantly innovating and the regulatory framework must respond.  This Bill facilitates the offer of units and derivatives of units in business trusts in Singapore, and in so doing, creates a new asset class which could potentially add depth and sophistication to Singapore's capital markets.

12   Sir, I beg to move.

[1] The Financial Advisers Act regulates, inter alia, the provision of advice concerning any investment product other than advising on corporate finance within the meaning of the SFA. "Investment product" is referenced to "any capital markets product" as defined under the SFA as "any securities, futures contracts, contracts or arrangements for the purposes of foreign exchange trading..."