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Singapore – MAS Consultation On Proposals To Facilitate Better Understanding Of Prospectuses.

11 November, 2013

 

Legal News & Analysis – Asia Pacific – Singapore  Capital Markets

 

The Monetary Authority of Singapore (MAS) has released a consultation paper on proposed enhancements to the current rules relating to prospectus disclosures for offers of securities. The closing date for providing feedback to the consultation paper is 14 November 2013.


Introduction


Under the Securities and Futures Act (SFA), any offer of securities must be made in or accompanied by a prospectus registered by MAS, unless an exemption applies. The prospectus is required to contain all information that investors and their advisers would reasonably require to make an informed investment decision. The issuer, its directors and its advisers are subject to statutory liabilities for the disclosures made in the prospectus.


In order to improve the quality of the information disclosed and to facilitate better understanding by investors of key information presented in the prospectuses, MAS is proposing to:


(a) extend the requirements for a product highlights sheet (PHS); and
(b) allow certain information contained in a separate document outside the prospectus to be incorporated by reference.


MAS is also proposing to develop a regulatory guide to highlight common drafting problems and encourage good drafting practices for prospectuses, which will be the subject of a separate consultation.


Product Highlights Sheet


A PHS is a simplified disclosure document that highlights the key features and risks of an investment product described in a prospectus in a clear and concise manner. Currently, a PHS is required only for offers of investment products which are more complex in nature (namely, asset-backed securities, structured notes, unlisted collective investment schemes and exchange-traded funds). A PHS is regarded as a standalone document and is not subject to prospectus liabilities under the SFA.


Extension Of Requirements


To improve investors’ ability to understand the nature and risks of the securities that they are considering investing in and to enable investors to make comparisons across different types of securities, MAS is proposing to extend the PHS requirements to:

 

(a) debt securities for which a prospectus or an offer information statement (OIS) is required to be issued;
(b) preference shares, perpetual securities and convertible bonds (collectively, hybrid securities) for which a prospectus or OIS is required to be issued; and
(c) ordinary shares, and units in REITs and BTs (collectively, equity securities) for which a prospectus is required to be issued.


A summary of the form and content requirements proposed for the various types of PHS, as well as the different templates, have been set out in Annexures A to D of the MAS consultation paper.


Statutory Liability For PHS


For the purposes of statutory liability, the PHS is regarded as a standalone document and is not subject to prospectus liabilities under the SFA, although there are separate compliance requirements applicable to the PHS itself such as the following:


(a) the PHS shall not contain any statement or matter that is false or misleading in the form or context in which it is included;
(b) the PHS shall not contain any material information that is not contained in the prospectus;
(c) the PHS shall not contain any material information that differs in any material particular from that set out in the prospectus;
(d) the PHS shall not omit any information from any part of the PHS which would result in that part of the PHS being construed as false or misleading; and
(e) the PHS shall give a fair and balanced view of the nature, material benefits and material risks of the securities offered.


Profile Statements


Section 240(4) of the SFA allows issuers to distribute a profile statement instead of a full prospectus subject to certain conditions. As a profile statement is already an abridged version of the prospectus, MAS does not propose to require a PHS to be given to investors where a profile statement is distributed.

 

Incorporation By Reference


Currently, the SFA does not expressly permit information that is not contained in the prospectus to be incorporated in the prospectus by reference. MAS is proposing to allow certain types of information to be incorporated by reference so as to shorten the length of prospectuses while enabling investors to receive fair notice of information that is important to them. In doing so, the following conditions must be complied with:


(a) information that may be incorporated by reference is limited to the following:

(i) the audit report in respect of historical financial information which is presented in the prospectus;
(ii) the list of directorships held by directors of the issuer in other corporations in the last 5 years; and
(iii) the valuation reports and industry overview reports which are prepared by experts who have given their consent pursuant to the SFA;

(b) any information that is required to be disclosed in a PHS must not be incorporated by reference;
(c) the prospectus contains sufficient information about the incorporated information to allow an investor to decide whether to obtain a copy of the incorporated information;
(d) the prospectus contains a statement that the issuer will provide a copy of the incorporated information free of charge upon request; and
(e) the information which is incorporated by reference is contained in a document lodged on OPERA.


The information which is incorporated by reference would be regarded as part of the prospectus and would be subject to prospectus liabilities.

 

Stamford Law

 

For further information, please contact:

 

Joo Khin Ng, Director, Stamford Law
jookhin.ng@stamfordlaw.com.sg


Bernard Lui, Director, Stamford Law
bernard.lui@stamfordlaw.com.sg

 

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