Singapore MAS Launches Due Diligence & Conduct Requirements on Transactions for Corporate Finance Advisers Fund-Raising from Public for IPO & M&A, Requirements Include Conflict of Interests, Disclosure of Material Information, Background Checks, Interviews with Stakeholders, Site Visits of Key Assets and Skills & Knowledge of Service Providers
25th February 2023 | Singapore
Singapore central bank Monetary Authority of Singapore (MAS) has issued a new Notice (23/2/23) imposing a minimum baseline standards of due diligence and conduct requirements on transactions for Corporate Finance Advisers fund-raising from the public (Eg. IPOs & M&As), with requirements including Conflict of Interests, Disclosure of Material Information, Background Checks, Interviews with Stakeholders, Site Visits of Key Assets and Skills & Knowledge of Service Providers. Singapore MAS: “CF advisers that assist entities in fund raising from the general public will henceforth be subject to mandatory minimum standards when conducting due diligence on CF transactions. These include conducting background checks and interviews with relevant stakeholdersSuch relevant stakeholders include controlling shareholders, key management and major customers and suppliers of the prospective issuer.; conducting site visits of prospective issuers’ key assets; assessing knowledge, skills and experience of third-party service providers; as well as ensuring that material issuesFor example, material allegations against the prospective issuer. are satisfactorily resolved or clearly disclosed. CF advisers will also have to comply with enhanced requirements to mitigate conflicts of interests, such as where the adviser’s related corporations or controlling shareholders also provide services to the same customer.” These requirements are set out in the Notice on Business Conduct Requirements for Corporate Finance Advisers. MAS has taken into account feedback received from the public consultation. MAS thanks all respondents for their feedback. The Notice can be accessed here , and the public consultation and MAS’ response to the feedback received can be found here .
“ Singapore MAS Launches Due Diligence & Conduct Requirements on Transactions for Corporate Finance Advisers Fund-Raising from Public, Requirements Include Conflict of Interests, Disclosure of Material Information, Background Checks, Interviews with Stakeholders, Site Visits of Key Assets and Skills & Knowledge of Service Providers “
Lim Tuang Lee, Assistant Managing Director (Capital Markets), Monetary Authority of Singapore (MAS): “Corporate finance advisers, through their work in advising prospective issuers, enable investors to make informed decisions by facilitating adequate and accurate disclosures. They play an important role in safeguarding investor interests and the integrity of our capital markets.”
Corporate Advisers refer to holders of a capital markets services (CMS) licence and banks, merchant banks and finance companies exempt from holding a CMS licence to undertake the regulated activity of advising on corporate finance.
Singapore MAS Launches Due Diligence & Conduct Requirements on Transactions for Corporate Finance Advisers Fund-Raising from Public, Requirements Include Conflict of Interests, Disclosure of Material Information, Background Checks, Interviews with Stakeholders, Site Visits of Key Assets and Skills & Knowledge of Service Providers
Singapore Central Bank MAS to Introduce Due Diligence for Corporate Finance Advisers for IPO & M&A Activities
17th December 2021 – Singapore Central Bank Monetary Authority of Singapore (MAS) has published a consultation paper to raise the standards of conduct of corporate finance (CF) advisers by introducing requirements for conducting due diligence for work such as IPOs and M&As to improve the quality of disclosures from entities seeking to raise funds from the public, thus allowing investors to make informed decisions on investments. The consultation paper is available on MAS’ website . MAS invites interested parties to submit their comments on the proposals here by 15 February 2022. (IPO ~ Initial Public Offering, M&A ~ Mergers & Acquisitions)
Corporate Finance (CF) Advisers
Corporate Finance (CF) advisers are currently required to have effective internal controls to address the risks associated with their activities and mitigate conflicts of interests that may arise from these activities. The proposed requirements set out the minimum standards which CF advisers should adhere to when conducting due diligence on CF transactions. Under the proposal, CF advisers will be required to:
- Exercise reasonable judgement in determining the scope of the due diligence work to be performed on a CF transaction;
- Assess the veracity of information obtained in the course of their due diligence;
- In relation to their role as issue managers of initial public offerings (IPOs), satisfy additional requirements such as assessing the suitability of listing the applicant and conducting an independent review of the due diligence performed by the team responsible for advising on a specific IPO. This is to better safeguard the interests of retail investors.
The consultation paper is available on MAS’ website . MAS invites interested parties to submit their comments on the proposals here by 15 February 2022.
Mr Lim Tuang Lee, Assistant Managing Director (Capital Markets), MAS:
“Corporate finance advisers play an important gatekeeping role in safeguarding the integrity of our capital markets.
The proposed requirements are consistent with best practices in major jurisdictions and seek to strengthen investor confidence in our capital markets.”
Background
CF advisers play an important role in the capital markets by providing advice to entities which intend to raise funds or are involved in takeover and merger transactions. In particular, issue managers (“IMs”)1 which advise on initial public offerings and other public issuances serve as gatekeepers of quality in the capital markets. They are responsible for conducting due diligence on the issuer and providing guidance to the issuer to ensure disclosures are accurate and complete in all material aspects. In a disclosure-based regime, investors rely on these disclosures as a key source of information to make their investment decisions.
CF advisers are subject to general conduct requirements under the Securities and Futures (Licensing and Conduct of Business) Regulations, such as ensuring effective controls and segregation of duties to mitigate potential conflicts of interests that may arise from their operations, and maintaining records to explain the steps taken to monitor compliance with the policies and procedures relevant to their business. IMs advising issuers on public offers are also subject to the prospectus liability provision under section 253 of the Securities and Futures Act.
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