DD Requirements for Corporate Financial Advisers
The Monetary Authority of Singapore (“MAS”) is consulting on its proposal to introduce due diligence requirements for corporate finance (“CF”) advisers when they advise on corporate finance transactions. Currently, CF advisers are subject to general conduct requirements under the Securities and Futures (Licensing and Conduct of Business) Regulations, such as ensuring effective controls and segregation of duties to mitigate potential conflicts of interests that may arise from their operations, and maintaining records to explain the steps taken to monitor compliance with the policies and procedures relevant to their business. Issue managers advising issuers on public offers are also subject to the prospectus liability provision under section 253 of the Securities and Futures Act.
As part of its efforts to improve industry standards, MAS is proposing to introduce regulatory requirements on the conduct of due diligence by CF advisers, via a new Notice. This will raise the minimum standards of conduct of CF advisers, strengthen public confidence and promote informed decision making by investors through quality disclosures. These requirements have been developed in line with industry best practices and the requirements in other major jurisdictions.
Under the proposal, corporate finance advisers will be required to:
- act with due care, skill and diligence when performing due diligence;
- establish a governance framework over the performance of due diligence by their representatives and staff; and
- keep records of the due diligence work performed.
CF advisers acting as issue managers for initial public offerings will also have to assess and be satisfied that a listing applicant is suitable for listing and ensure that there is an independent review of the due diligence performed by the transaction team for each listing application.