The Monetary Authority of Singapore (MAS) has backed down on changes to its structured finance regime following negative feedback from the industry. But several controversial proposals, such as its products highlight sheet, will be enforced.
Last week, MAS released a second set of conclusions to its March 12 2009 consultation paper on selling and marketing unlisted investment products. It also issued a new consultation covering listed and unlisted instruments.
The regulator has ditched plans to define “complex investment products” that would require mandatory advice and health warnings in favour of a list of exempted products. It will also reconsider plans to extend financial advisors’ civil liability and will not prescriptively regulate remuneration of product sales.
But the scope of product highlights sheets has been extended (to listed products as well as unlisted). This increases the number of documents for which the issuer is liable if there is a mis-statement.
“Initially the product highlights sheet was to be part of the prospectus, but there were concerns that this would encourage people to use a lot of jargon to protect themselves from liability,” said Lian Chuan Yeoh at Allen & Overy.
“The sheet is now a separate document but it’s questionable whether this has changed the game or whether an issuer could be liable for mis-statements in the sheet if it fails to fully summarise the risks.”
Liability is also a concern on another of MAS’s proposals: the appointment of trustees for unlisted products that are issued with a prospectus.
Taking its wording from legislation governing collective investments, trustees must be appointed with “a covenant binding the trustee to exercise all due diligence and vigilance in carrying out its functions”. MAS has alluded to statutory protection for trustees that act in good faith or that are directed in their action by the regulator but this has yet to be firmed up.
However, it is not unusual for Singapore regulators to refine regulatory proposals many times as they receive market feedback.
“MAS is philosophically minded to start doing something and adjust it as it goes along,” said Yeoh. “They had to be seen to do something in response to the Lehman notes, but this is consistent with the approach we often see them take to securities legislation.”
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Clifford Chance summerises MAS's response
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