The Securities Industry Council (SIC) has amended the Code on Collective Investment Schemes (Amended Code). The amendments took effect on 1 January 2018 (except as set out below). The changes provide for increased disclosures for funds and REITs. A new set of rules governing precious metal funds has been introduced.
Increased Disclosures in Prospectuses of Funds
Managers of funds should establish a set of internal credit assessment standards for their investments and put in place a credit assessment process for compliance with these standards. The scheme prospectus should state that the manager has established a set of such standards and that information on the process is available to investors on request.
The Amended Code requires recognised funds to comply (where applicable) with the prospectus disclosure requirements in the Amended Code. The Consultation Paper on Proposed Amendments to the Code on Collective Investment Schemes had noted that the additional disclosure requirements would apply in the following situations:
- Where performance fees are payable;
- Where the fund invests in financial derivatives;
- Where the fund carries out securities lending or repurchase transactions; and
- Where the fund is an index fund.
Advertisements for Funds to Follow Specified Guidelines
Managers of authorised and recognised funds will be required to follow the guidelines, Recommended Disclosures to Support the Presentation of Income Statistics in Advertisements and the Code of Best Practices in Advertising Collective Investment Schemes and Investment-Linked Life Insurance Policies, issued by the Investment Management Association of Singapore. The effective date for this is 1 July 2018.
Increased Disclosures in Semi-Annual and/or Annual Reports
Fund managers are required to disclose certain matters in their semi-annual and annual reports where they carry out securities lending and repurchase transactions. Under the Amended Code, a further set of matters have been set out for disclosure. These include the amount of securities on loan as a proportion of total lendable assets and of the funds’ assets under management, the top 10 collateral securities and various other matters. This requirement will apply to the first annual report relating to the financial year ending on or after 31 December 2018.
Changes Affecting REITs
The following clarifications to the disclosure rules governing REITs have been made in the Amended Code:
- In disclosing weighted average lease expiry (WALE) in the annual report of a REIT, WALE should be calculated based on the date of commencement of the lease and not the date of signing of the lease agreement.
- A REIT is required to make certain disclosures where income support is embedded in a master lease. A master lease will be considered to have an embedded income support arrangement if the rent under the master lease is higher than the “market rents of the underlying sub-leases at the time of entry or renewal of the master lease arrangement”. The term “market rent’ has been defined as “the estimated amount for which a property would be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had acted knowledgeably, prudently and without compulsion.”
In addition to the above, the following are noteworthy:
- A REIT listed on the SGX may issue summary financial statements to unitholders in its annual report instead of the full financial statements and reports.
- A REIT should hold its first AGM within 18 months of its authorisation instead of its constitution.
Precious Metal Funds
A set of rules for schemes that invest solely in physical precious metals (Precious Metal Funds) has been developed. A Precious Metal Fund may invest in gold, silver and platinum only.