On 17 September 2013, the Monetary Authority of Singapore (MAS) issued a Consultation Paper on Draft Regulations pursuant to the Securities and Futures Act (Cap. 289) (SFA) and the Financial Advisers Act (Cap. 110) (FAA). The MAS is proposing amendments to existing regulations under the SFA and FAA to give effect to certain policy proposals relating to the requirements for:
- a Product Highlights Sheet for certain offer of securities under Part XIII of the SFA;
- issuers of unlisted debentures to provide timely and ongoing disclosures; and
- advertisements of certain offers of securities to give a fair and balanced view of the product and to comply with certain restrictions.
In addition, MAS is proposing to remove exemptions available to holders of a financial adviser’s licence under the FAA and persons who are exempt from requirements to hold such licences under the FAA (FAs) from complying with certain business conduct requirements under the FAA when providing financial advisory services to overseas investors.
All comments and feedback on the Consultation Paper are to be submitted to MAS by 17 October 2013.
Product Highlights Sheet
A Product Highlights Sheet (PHS) is a brief document (separate from the prospectus) which highlights the key features and risks of an investment product. Under the SFA, a PHS should be prepared and furnished to investors for offers of asset-backed securities, exchange-traded notes, unlisted collective investment schemes and exchange traded funds, where the offer is made in or accompanied by a prospectus.
The MAS is proposing to prescribe the form and content of the PHS in the Securities and Futures (Offer of Investments) (Shares and Debentures) Regulations (SF(SD)R) and the Securities and Futures (Offer of Investments) (Collective Investment Schemes) Regulations (SF(CIS)R).
A PHS is to contain:
- a description of the key features and risks of the product;
- where appropriate, diagrams and illustrations of the features and structure of the product; and
- in the case where technical terms are used in the PHS, a glossary .
Ongoing Disclosure for Unlisted Debentures
Issuers of unlisted debentures offered to retail investors which have tenures of 12 months or longer are required to provide timely and meaningful ongoing disclosures to its investors. Guidance on when and how such disclosures are to be made is currently set out in the Guidelines on Ongoing Disclosure Requirements for Unlisted Debentures (MAS Guideline SGA 13-G10). The MAS is proposing to prescribe the form and content of ongoing disclosures by amending the SF(SD)R.
Disclosures to retail investors shall be provided in the form of semiannual reports, the content of which will be prescribed in the SF(SD)R. In addition, information that may materially affect the risks and returns of, or the price or value of, the unlisted debentures, must be disclosed immediately. The MAS is also proposing for further disclosures to be made in relation to bid or redemption prices of the unlisted debentures, as well as the financial statements of the issuers.
Fair and Balanced Advertising and Other Advertising Restrictions
The MAS is proposing that advertising materials for investment products be required to give a fair and balanced view of the products and comply with other advertising restrictions. The proposed restrictions will cover all persons preparing or issuing advertisements in relation to shares, debentures, business trusts and collective investment schemes which are subject to prospectus requirements under Part XIII of the SFA, whether listed or unlisted. Similar restrictions will apply to advertisements in respect of capital markets products prepared, published, circulated or distributed by capital markets licence holders, exempt financial institutions, and their representatives. For FAs and their representatives, the restrictions will extend to advertisements in respect of life policies and structured deposits.
The MAS has proposed to prescribe the restrictions on advertisements by amending the SF(SD)R, the SF(CIS)R, the Securities and Futures (Offers of Investments) (Business Trust) Regulations, the Securities and Futures (Licensing and Conduct of Business) Regulations and the Financial Advisors Regulations (FAR).
An advertisement or publication shall be considered as giving a fair and balanced view of the products offered if:
- it gives a balanced description of the risks and potential of the securities;
- it gives a proportionate level of prominence to the warnings, disclaimers and qualifications in relation to the claims on potential returns to which they refer to;
- it does not give the impression that an investor can profit without risk;
- it does not contain words or graphics that could convey an impression that is inaccurate or inconsistent with the nature or the risks of the products;
- it does not omit any material information if the omission would cause the advertisement to be misleading; and
- it does not present information in footnotes in a way that could alter the meaning of the main text of the advertisement or publication or cause difficulty to an investor in understanding the securities.
Other advertising restrictions include presenting information in a clear manner and not suggesting that the securities offered are, or are comparable to, a deposit; or that there is no or little risk of the investor losing his principal amount or not achieving the stated or targeted rate of returns.
To ensure accountability for the content of the advertisements published, the MAS has proposed to require the chief executive officer or executive director of the financial institutions and other persons who are subject to these restrictions to approve advertisements before they are published.
Removal of Exemption for Advising Overseas Investors
The MAS is proposing to remove the exemption in the FAR exempting FAs from having to comply with certain business conduct requirements under the FAA when providing financial advisory services to overseas investors. Such conduct of business requirements include:
- requiring the FAs to have a reasonable basis for making a recommendation with respect to any investment product;
- requiring the FAs to adhere to regulations with respect to receipt and segregation of client’s money or property; and
- requiring the FAs to make various disclosures to clients.
The amendment is proposed to ensure that the regulatory regime for financial advisory services protects investors equally, irrespective of their citizenship/residency status or physical location, and to provide certainty to overseas investors on the safeguards that apply when they receive financial advisory services from FAs in Singapore.