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


The Monetary Authority of Singapore (“MAS“) published on December 15, 2021 a consultation paper on a proposal for an opinion to require corporate financing (“FC“) advisers to observe certain minimum standards when undertaking due diligence work.

This is part of MAS’s efforts to raise standards of conduct for CF advisers, build public confidence, and promote informed decision-making by investors.

  1. introduction

For your information, CF advisers advise entities wishing to raise funds or which are involved in buyout and merger transactions. Some CF advisers also act as issue managers and advise on IPOs (“IPO“) and other public broadcasts.

CF advisers are currently subject to existing conduct requirements, such as mitigating potential conflicts of interest that may arise from their operations and maintaining records relating 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 concerning the public issues they advise.

Notwithstanding the above requirements, due to the key role that CF advisers play in ensuring accurate and complete information, MAS proposes to impose additional requirements to ensure that investors can rely on better information when ‘they make their investment decisions.

  1. Proposed Notice

A. Scope of the proposed opinion

As a preliminary matter, the proposed advice will apply to all CF approved advisers, as well as banks, investment banks and finance companies that are exempt advisers to the CF. The requirements of the proposed advice will apply to CF advisory missions that are concluded on or after the effective date of the advice. At this time, MAS has not indicated when the notice is expected to come 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 CF advisers when advising on CFP fundraising transactions. company and Part II including specific requirements that additionally apply when CF advisers are involved. in IPOs, reverse takeovers and very large transactions (as defined in SGX motherboard rules or Catalist rules).

B. Requirements for corporate finance advice

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

Second, CF advisors will be required to act with care, skill and diligence when providing advice on corporate finance matters, including, but not limited to, when determining the degree of due diligence. necessary for a transaction, evaluate and verify the information provided by their customers, or be on the lookout for any contradictory information or developments.

Third, CF advisors will be called upon to manage conflicts that may arise between their own interests and those of their clients. They will also need to manage conflicts of interest that arise in the course of their advisory work to the CF and other activities they conduct in connection with the bidding process. They will also need to manage the risks that their staff will disclose confidential or price sensitive information, or trade in capital 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 advice on corporate finance (if applicable).

CF advisers will also need to establish a governance framework for the exercise of staff due diligence. 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 keep records demonstrating compliance with the Notice and / or evidencing 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 made, completed or otherwise entered into.

C. Advisory requirements for IPOs, reverse takeovers and very substantial acquisitions

Part II of the Proposed Notice sets out requirements that further apply to CF advisers who advise on IPOs (including listings through PSPCs) on the SGX, and in addition, who provide advice on IPOs (including listings through PSPCs) on the SGX. advice on reverse takeovers and very substantial acquisitions (as defined in the SGX listing rules) on SGX.

First, these CF advisers are to advise and guide applicants for registration on their duties and responsibilities under relevant laws and regulations, including the 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 be satisfied that a candidate for enrollment is suitable for enrollment. Such due diligence would involve verifying material claims, background checks, monitoring any information or development regarding the registration applicant or the transaction, and due diligence on key business assets, major business customers and other parties. stakeholders.

The due diligence carried out for each quote request must also be reviewed by the staff of the CF advisor who is independent from the transaction team. To the extent that the CF advisor uses a third party service provider, he or she must remain responsible for any due diligence work performed by the third party service provider. The CF advisor should also investigate any allegations or complaints made against the applicant for registration or other affected parties, if he becomes aware of such allegations or complaints.

As with the use of third parties, when CF advisers 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 would be reasonable for them to rely on these documents.

Finally, before submitting the application for registration and before the applicant for registration is admitted to the SGX, the CF advisor must have reasonable grounds to be satisfied, among other things, that due diligence has been carried out to satisfactorily, that the information submitted in the registration application is complete, that all issues that have been identified by an independent review have been resolved, and that the registration applicant and other affected parties are able to comply with obligations under the registration rules.

  1. Closing date of the consultation

The consultation ends on 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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