The Monetary Authority of Singapore (MAS) issued the Notice on Business Conduct Requirements for Corporate Finance Advisers (Notice No.SFA-04-N21) (Notice) on 23 February 2023. The Notice imposes new on corporate finance advisers (CF advisers) – i.e., holders of capital markets services licences to advise on corporate finance or those exempt from holding such licence – and their representatives when conducting due diligence on prospective issuers and includes measures to mitigate potential conflicts of interest. MAS intends the Notice to improve the quality of disclosures to investors and raise the standards of conduct of CF advisers. The Notice will become effective on 1 October 2023.
The Notice’s due diligence requirements are significant and wide-ranging. In general, CF advisers must now “conduct due diligence with reasonable care, skill and diligence” to determine the due diligence appropriate for a transaction; to assess the accuracy and completeness of, and appropriately verify, statements, representations and other information provided by their clients; and monitor new information and developments that may contradict previous information.
For transactions that involve a listing on the Singapore Exchange (Exchange) – whether the mainboard or Catalist – CF advisers must assess and “have reasonable grounds to believe” the listing applicant is suitable and that the applicant’s senior management will adequately supervise the planning and implementation of due diligence for the transaction. CF advisers must also ensure their clients understand their obligations under the Securities and Futures Act 2001 and the Exchange’s listing rules. If a CF adviser engages a third party to conduct any portion of the due diligence, it must verify the third party has appropriate qualifications and must independently evaluate the third party’s work. The Notice also imposes significant requirements on CF advisers to vet experts retained by listing applicants and to independently assess the conclusions and opinions of those experts.
Before listing applications are submitted, and before applicants are admitted to the Exchange, CF advisers must “have reasonable grounds to be satisfied” that all material issues identified during due diligence are resolved or disclosed; that the application is complete; that the applicant has complied with the relevant listing rules and has procedures to enable future compliance; and that the applicant’s directors are suitably experienced and competent.
The Notice requires CF advisers to identify and mitigate actual and potential conflicts of interest with their customers, to disclose those conflicts to their customers when appropriate and to decline or withdraw from an engagement if a material conflict cannot be mitigated. CF advisers must also develop and implement policies and procedures to protect confidential or price sensitive information and ensure that only persons who need to know such information have access to it, and to restrict and monitor dealings by its directors, representatives and specified personnel in capital markets products for which they possess confidential or price sensitive information or where dealing gives rise to a conflict of interest.
To implement the Notice, CF advisers must develop, adopt, monitor and maintain policies, procedures and controls to meet all of the Notice’s requirements. CF advisers must also make and maintain records required by the Notice and retain those records for at least 5 years.
CF advisers should promptly develop plans to be in full compliance with the Notice when it becomes effective on 1 October 2023. CF advisers’ plans should include the preparation and adoption of policies, procedures and controls to enable full compliance with the Notice and appropriate training of all personnel, including directors, senior managers, corporate finance representatives and other personnel.
OrionW regularly advises clients on capital markets regulatory matters. For more information about capital markets regulation, please contact us at info@orionw.com.
Disclaimer: This article is for general information only and does not constitute legal advice.
