MAS consults on the introduction of new due diligence requirements for corporate finance advisers – Finance and banking


The Monetary Authority of Singapore (“SAM“) published on December 15, 2021 a consultation document on a draft notice to require corporate financing (“CF“) advisers to meet certain minimum standards when undertaking due diligence work.

This is part of MAS’ efforts to raise the standards of conduct for FC advisors, build public trust and promote informed decision-making by investors.

  1. introduction

As an indication, FC advisers advise entities wishing to raise funds or are involved in takeover or merger operations. Some FC advisers also act as issue managers and advise on initial public offerings (“IPOs“) and other public broadcasts.

CF Advisors are currently subject to existing conduct requirements, such as mitigating potential conflicts of interest that may arise from their operations and maintaining records related to monitoring compliance with their policies and procedures. Issue managers are also liable to criminal liability for any false or misleading statements contained in the prospectuses relating to the public issues they advise.

Notwithstanding the above requirements, due to the key role FC advisers play in ensuring accurate and complete information, MAS proposes to impose additional requirements to help ensure that investors can rely on higher quality information. when making their investment decisions.

  1. Proposed notice

A. Scope of the proposed notice

Initially, the proposed notice will apply to all licensed FC advisers, as well as banks, merchant banks and finance companies that are exempt FC advisers. The requirements of the proposed notice will apply to CF consulting engagements entered into on or after the effective date of the notice. At this time, MAS has not indicated when the advisory is expected to go into effect.

The proposed advice (presented in Annex A of the consultation document) is divided into two parts, Part I comprising the general requirements that apply to FC advisers when advising on corporate finance transactions and the part II including specific requirements which also apply when FC advisers are involved. in IPOs, Reverse Takeovers and Very Large Transactions (as defined in the SGX Motherboard Rules or the Catalist Rules).

B. Requirements for corporate finance advice

Under Part I of the Proposed Notice, CF Advisors will first be required to develop and implement policies, procedures and controls to comply with the Proposed Notice, as well as monitor their implementation and make improvements if necessary.

Second, CF advisers will be expected to act with care, skill and diligence when advising on corporate finance, including, but not limited to, when determining the level of care required for a transaction, evaluate and verify the information provided by their clients, or be on the lookout for any contradictory information or developments.

Third, CF advisors will be called upon to manage any conflicts that may arise between their own interests and the interests of their clients. They will also need to manage conflicts of interest that arise in connection with their CE consulting activities and other activities in which they engage in relation to the bidding process. They will also need to manage the risks of their staff disclosing confidential or price-sensitive information, or trading financial market products using such confidential or price-sensitive information. If they are unable to adequately mitigate these conflicts of interest, they would be required to decline the engagement or refrain from providing further corporate finance advice (if applicable).

CF advisors will also need to establish a governance framework for the exercise of due diligence by personnel. This should include ensuring that material non-compliance issues are reported to senior management and that staff have the appropriate knowledge, skills and experience for the relevant transactions in which they are involved.

Finally, CF advisers must maintain records evidencing compliance with the advice and/or evidencing the due diligence work performed for clients or any advice given to clients. These records must be kept for at least 5 years from the date the corporate finance transaction was completed, terminated or otherwise entered into.

C. Requirements for advice on IPOs, reverse takeovers and very large acquisitions

Part II of the proposed notice sets out the requirements that additionally apply to CF advisers advising on IPOs (including listings via SPACs) on the SGX, and additionally advising on takeovers. Reverse Control and Very Large Acquisitions (as defined in the SGX Listing Rules) on the SGX.

First, these CF advisors must advise and guide applicants for registration on their duties and responsibilities under relevant laws and regulations, including relevant registration rules. This will be subject to the terms of the agreement between the CF advisor and the client.

Second, they are required to assess and ensure that an applicant for registration is suitable for registration. Such due diligence would involve verification of material statements, background checks, monitoring of any information or developments regarding the listing applicant or the transaction, and due diligence on key business assets, major business customers and other stakeholders.

The due diligence performed on each listing request will also need to be reviewed by staff of the CF Advisor who are independent of the deal team. To the extent that the CF Advisor engages a Third Party Service Provider, it shall remain responsible for any due diligence work performed by the Third Party Service Provider. The CF Adviser shall also investigate any allegations or complaints made against the applicant for registration or other affected parties, if he or she becomes aware of such allegations or complaints.

As with the use of third parties, when CF advisors rely on experts, they should also ensure that the experts are sufficiently qualified to provide their opinions and/or reports, and review the opinions and/or reports to ensure that it is reasonable for them to rely on these documents.

Finally, before submitting the application for registration and before the candidate for registration is admitted to the SGX, the FC adviser should have reasonable grounds to be satisfied, inter alia, that due diligence has been carried out to satisfactory manner, that the information submitted in the application for registration is complete, that all issues that have been identified through independent review have been resolved, and that the applicant for registration and other affected parties are able to comply with the obligations set out in the Listing Rules.

  1. Closing date of the consultation

The consultation closes February 15, 2022 and a copy of the MAS consultation document can be obtained here.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.


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