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Singapore – Proposed Guidelines On Good Drafting Practices For Prospectuses And Proposals To Facilitate Better Understanding Of Prospectuses.

23 February, 2015


Legal News & Analysis – Asia Pacific – Singapore – Corporate/M&A




On 5 February 2015, the Monetary Authority of Singapore (“MAS”) issued:


  • guidelines on good drafting practices for prospectuses (the “Guidelines”); and
  • its response to feedback received on its consultation paper of 14 October 2013 relating to its proposals to facilitate better understanding of prospectuses (the “October 2013 Consultation Paper”).


The Guidelines and response follow the October 2013 Consultation Paper and form part of MAS’ proposals to improve the readability of prospectuses and facilitate retail investors’ understanding of key information disclosed in prospectuses.


Proposed Guidelines On Good Drafting Practices


The Guidelines aim to provide regulatory guidance to issuers and their professional advisers on good drafting practices for prospectuses. The Guidelines would also be relevant in the preparation of other disclosure documents, such as offer information statements (“OIS”).


Issuers and professional advisers are encouraged to adopt the general principles stated in the Guidelines but are reminded that: (a) the Guidelines are not meant to be exhaustive; and (b) they should consider how the Guidelines can be appropriately applied in their respective individual circumstances.


To avoid common drafting issues in prospectuses, the following general principles should be adopted:


1. Using Plain English


Prospectuses should be drafted in plain, everyday English to facilitate understanding and informed decision-making by retail investors.


In this regard, the Guidelines propose that:


  • the active voice be used in sentence structures so as to make prospectuses more direct and easier to read;
  • hidden verbs1 should be avoided where possible in sentences;
  • personal pronouns2 be used to better engage investors and highlight issues for their attention;
  • plain everyday words should be used in lieu of complex, abstract or formal words where possible;
  • legal, financial and technical jargons be avoided where possible;
  • where technical jargon is used, the terms should be explained clearly with the necessary definitions placed in a glossary for ease of reference;
  • short, straightforward sentences be used in prospectuses. Complex information may be presented in tabulated form  and long sentences should be well structured. To minimize confusion, issuers and their professional advisers should use positive sentences instead of negative statements;
  • boilerplate disclosures should be assessed for relevance and be customized to suit the context of each particular offer. The use of vague boilerplate disclosures that may not be meaningful to investors should be avoided; and
  • issuers and their professional advisers should refrain from reproducing lengthy contractual terms in their entirety, a summary of key points for such contractual terms should be used instead.


2. Presenting Information In A Clear, Concise And Logical Manner


MAS proposes that:


  • in general, a clear, concise and logical presentation should be used to enhance the effectiveness of the plain English used in prospectuses;
  • novel or unusual issues, and the implications of such, should be highlighted prominently in prospectuses;
  • complex information may be conveyed using visuals, bullet points and examples to facilitate better understanding by investors; and
  • to improve readability, prospectuses should be formatted with an effective layout coupled with the use of descriptive headings and sub-headings. Issuers and their professional advisers should also ensure that information is presented in a logical order and balanced manner so as to convey a realistic, fair and balanced view to investors.


3. Avoid Unnecessarily Lengthy Prospectuses


Redundant and irrelevant information should be omitted to keep the length of prospectuses as short as necessarily possible.


Cross-references, while not being used excessively, are recommended to reduce repetition of information.


MAS seeks views and comments on the proposed Guidelines and the consultation period closes on 13 March 2015.


Responses To Feedback Received On October 2013 Consultation Paper


Separately, MAS also issued its response to feedback received on other proposals in the October 2013 Consultation Paper. After receiving broad support from various respondents, MAS will proceed with the following proposals:


1. Extension Of Product Highlights Sheet Requirement


The requirement for a product highlights sheet (“PHS”) will be extended to offers of debt securities, hybrid instruments and equity securities, where the offers are required to be made in or accompanied by a prospectus or OIS. Currently, a PHS is only required for offers of complex investment products such as asset-backed securities, structured notes, unlisted collective investment schemes and exchange traded funds. The extension of the PHS requirement will facilitate clearer and more effective disclosures, better allowing investors to make informed investment decisions.


In conjunction with the above, MAS has issued a set of guidelines on the PHS for offers of debt securities, hybrid instruments and equity securities (Guideline No. SFA 13-G13) (the “PHS Guidelines”). The PHS Guidelines provide guidance to issuers and their professional advisers in preparing a PHS for such offers and will be effective from 1 July 2015.


The PHS Guidelines may be incorporated into legislation in the future.


2. Incorporation Of Information By Reference


Information contained in a separate document outside the prospectus may now be incorporated in the prospectus by reference to the separate document, subject to certain safeguards. Information which may be incorporated by reference is limited to (i) audit reports in respect of historical financial information; (ii) list of directorships, held by executive officers of the issuer, in other corporations; (iii) expert reports; (iv) information on relevant laws or regulations applicable to the issuer; and (v) constituent documents of the issuer. The implementation of this proposal necessitates amendments to the SFA. MAS will be consulting on the draft amendments in due course.


End Notes:


1 Examples in which hidden verbs are replaced with active verbs:


“We made a decision to invest for the long term.”→ “We decided to invest for the long term.”


“An offering of securities will be made to the public.” → “We will offer securities to the public.”


2 Examples in which third-person pronouns are replaced with personal pronouns:


Investors should note that investments carry risk.” → “You should note that investments carry risk.”


Investors should seek professional advice.” →  “You should seek professional advice.”

Shook Lin Bok LLP 


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