Recognition of foreign schemes in Singapore is obtained through an electronic procedure and allows for the offer to certain categories of investors. The procedure and the rules around it are very streamlined due to the high level of sophistication of local regulation. And whilst Singapore is a well-established Asian jurisdiction, known to be a local hub for investment management, over the years EEA UCITS have been increasingly marketed in the region due to the fact that Singapore is also a regional hub for Asian assets and wealth.
Recognition of foreign schemes in Singapore operates on separate regimes. One for the offer to retail investors, entailing that a prospectus is issued, and another contemplating a set of exemptions for the offer to institutional and accredited investors.
Taking stock of some recent changes made to the applicable regulation, this post will concentrate on the mechanism of recognition of foreign schemes in Singapore on the basis of the exemptions for the offer to accredited investors, with a view to provide a detailed overview of what is required to gain such recognition and to maintain it once obtained.
Some legislative and regulatory references never hurt
The main body of legislation that comes into play in the process of recognition of foreign schemes in Singapore is Chapter 289 of the Securities and Finance Act. This chapter provides for the definition of the specific classes of investors – accredited, expert, institutional (please find here the relevant definitions) as well as identification of the cases of offers exempted from the requirement to issue a prospectus. Offers towards institutional investors, accredited investors and certain other persons (please find here the relevant provisions) are typically exempted.
Also relevant in the process of recognition of foreign schemes in Singapore is the implementing regulation on the offer of collective investment schemes. Namely the Sixth Schedule to the regulation (find it here) lists the features of the exempted offers. It is noteworthy to mention that even though there is no requirement to produce a prospectus, it is necessary to prepare and submit as part of the recognition process of foreign schemes in Singapore an information memorandum containing the information described in this schedule and listed also below.
Last piece of guidance that is worth a mention is a practitioner guide to Chapter 289 of the Securities and Futures act (find it here). This guide is a very brief overview of the requirements per type of offer and redirects the user to the relevant digital interface maintained by the Monetary Authority of Singapore (MAS) for the process of recognition of restricted foreign schemes.
In fact, similarly to other few regulatory authorities across the globe, the MAS streamlined the process for these types of recognition to the point that those are all carried out electronically online. Submission are easy to make for the first time and to maintain alike. For the purpose of an application, an agent is typically appointed by a director of the responsible person (i.e. the fund or the management company thereof) and that same agent will be in charge of populating the online form with relevant data that the director will validate electronically in order to complete the notification and renewal process.
Once recognition has been obtained for the first time, there is an ongoing obligation to renew such recognition on an annual basis and update the dynamic data provided as well as the information memorandum submitted. Since sometime around 2013, in fact, the evolution of the framework of the exemption for accredited investors has required that as part of the recognition process an information memorandum is provided in soft copy at the time initial submission and on an ongoing basis thereafter, depending on whether the fund documents comprising it have changed over the course of the previous year or not.
Ingredients required for the application
So, what are the ingredients in order to obtain recognition of an EEA UCITS in Singapore?
The first is the information memorandum, which needs to contain the following information:
- the investment objectives of the restricted scheme, and the investment approach of the fund manager;
- the risks of subscribing for or purchasing units in the restricted scheme;
- whether the restricted scheme is regulated by any financial supervisory authority and if so, the title and jurisdiction of the legislation and the contact details of the authority;
- information on whether the fund manager for the restricted scheme and, where applicable, the trustee or custodian, are regulated by any financial supervisory authority and, if so, the contact details of the authority;
- in case of a restricted Singapore scheme, the name and place of incorporation of the fund manager, and where applicable the trustee or custodian;
- in case of a restricted foreign scheme –
- where the scheme is a corporation –
- its place of incorporation and business address; and
- the name and place of incorporation or registration of the fund manager and where applicable, the trustee or custodian; or
where the scheme is not a corporation, the name and place of incorporation or registration of the fund manager and where applicable, the trustee or custodian.
- any redemption conditions and gating structures;
- policy regarding side letters that may further qualify the relationship between the restricted scheme and selected investors, and the nature and scope of such side letters;
- where applicable the past performance, or where information on the past performance may be obtained;
- the details on where the accounts may be obtained; and
- fees and charges payable by the investors and by the restricted scheme.
Realistically, EEA UCITS will make use of their existing prospectuses coupled with a wrapper for Singapore, which is a two-pager document containing disclosures imposed by the applicable Singapore regulation. The information memorandum should also combine marketing materials used in approaching local investors in Singapore, like commentaries and fact sheets.
Depending on the types of clients approached locally and in case commentaries are produced in local language for the benefit of those clients, it might be beneficial to add those language versions to the information memorandum too. This is also current market practice.
In addition to a soft copy of information memorandum, the online application form requires general details on the fund, its manager and custodian as well as dynamic data on the assets under management for the specific fund – both at a global level and in Singapore – at certain periods. The form also contains a set of closed-ended questions on the disciplinary and financial record of the manager.
Due to some recent changes in the applicable regulation, the application form now also requires that the types of investors to whom an offer is made is specified and, depending on the choice, also that brief details on the investment strategies are provided.
As a consequence of the above-mentioned recent changes, also, schemes that do not invest in capital markets products are now exempted from the requirement of the typical offer and have to apply for recognition through the digital process.
Considerations on distribution
Of course the legislative and regulatory framework for recognition of foreign schemes in Singapore is sophisticated and allows for swift access to market, especially with regards to enforcing the exemptions for the offer to accredited investors.
However the question is as to whether it is easy to penetrate the market in Singapore from a commercial angle.
Singapore is an interesting Asian domicile, where the main distribution channel is made of local banks. Those banks, however, have their own internal asset management arms and this makes for a competitive environment for foreign managers and their funds. Other distribution channels are regional and global private banks. The fact that there are more global private banks in Singapore is of advantage for all the managers that can leverage for Singapore on existing relationships with those global banks. The number of institutional investors that can be approached is also limited.
In essence, despite a favourable regulatory framework for offer of foreign funds, successful local fund distribution projects in Singapore are always the outcome of the deployment of the right language capabilities combined with a strong and deeply rooted network of local relationships.