Tuesday, October 13, 2015

Opt-In Regime for Accredited Investors and Other Enhancements to Investor Safeguards in Singapore

In its response to feedback on the proposals to enhance regulatory safeguards for investors in the capital markets, the Monetary Authority of Singapore ("MAS") has announced the extension of its regulations on specific non-conventional investment products and, most importantly, the introduction of an opt-in regime for Accredited Investors ("AIs").

Non-conventional investment products such as buy-back arrangements involving precious metals and collectively-managed investment schemes will be regulated as debentures and collective investment schemes (“CIS”) respectively in the future. The protection of investors will thus be expanded accordingly.

Investors who meet the prescribed wealth thresholds will not automatically become Accredited Investors (“AIs”) anymore. AI-eligible investors will be able to decide whether to opt-in to be treated as an AI. Investors who do not opt in must be classified as retail investors while investors who opt in become AIs and will be afforded the respective, lower level of investor protection. FIs are required to inform the client of the different protection and obtain clients’ acknowledgement of their AI status. Existing AI clients must be notified by the FI that they have been assessed as AIs and that they have the right to opt out of AI status and their acknowledgement obtained. The AI status of investors will be held on a per FI basis, i.e. it will apply in the relationship(s) with the specific FI only. An AI may at any time opt out again. In respect of past transactions as an AI, the limited regulatory safeguards for AIs, not the higher safeguards for retail investors, will continue to apply. FIs are also expected to monitor whether an investor continues to meet AI thresholds.

The MAS will modify the net personal assets test under the AI definition such that net equity of an individual’s primary residence can only contribute up to SGD 1 million of the SGD 2 million threshold. Alternatively, an individual with SGD 1 million of “net financial assets” will be able to qualify as AI. Moreover, non-AI account holders will be eligible to opt-in for AI status in respect of a joint account whereby at least one joint account holder must be an AI and all joint account holders must opt-in to be treated as AIs in respect of the joint account. The AI eligibility will also be expanded to all corporations of which all shareholders must be AIs as well as to trusts of which all beneficiaries are AIs.
For more information, please read our update here.

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