Amendments to the CIS Code

The Monetary Authority of Singapore (MAS) issued a consultation paper on 10 November 2016 (the Consultation Paper) relating to proposed amendments to the Code on Collective Investment Schemes (CIS Code). The consultation closed on 12 December 2016.

On 15 December 2017, the MAS published its responses to the Consultation Paper and the revised CIS Code.

Click to access the revised CIS Code.

The effective date of the amendments is 01 January 2018 unless otherwise stated. Some of the key amendments to the CIS Code are set out below:

Key Amendments

Details 

Precious metal funds
1. Requirements for precious metal funds
  • The MAS will impose the following requirements on precious metal funds in addition to the requirements for fund approval and prospectus registration which apply to all retail schemes:
    • where a precious metals fund invests in gold and silver, the fund must follow the London Bullion Market Association prices and good delivery rules
    • where a precious metals fund invests in platinum, the fund must follow the London Platinum & Palladium Market prices and good delivery rules, and
    • the prospectus of a precious metals fund should clearly state that an investment in the precious metals fund carries risks of a different nature from other types of funds which invest in transferable securities and that it is not intended to be a complete investment programme for any investor.
  • These requirements are set out in a new Appendix 7 under the revised CIS Code.
2. Investment caps on gold, silver and/or platinum
  • The MAS will not be imposing any limits on investments in gold, silver and/or platinum by the precious metal funds.
Enhancing transparency and market discipline
1. Manager’s credit assessment process
  • The MAS requires the manager to:
    • establish a set of internal credit assessment standards and put in place a credit assessment process to ensure that its investments are in line with these standards, and provide a statement in the prospectus disclosing the foregoing fact, and
    • provide a statement in the prospectus that information on its credit assessment process would be made available to investors upon request.
  • These requirements are set out under Chapter 3.1(g) and (h) of the revised CIS Code.
  • The manager is allowed to enter into agreements with the investor to keep the disclosed information confidential.
  • The effective date of these requirements will be 01 July 2018 or in the case of an existing prospectus, when the prospectus is next registered by MAS on or after 01 July 2018.
2. Securities lending and repurchase transaction
  • The revised CIS Code requires additional disclosures in the semi-annual and annual reports. Please refer to paragraph 8.8 of Appendix 1 to the revised CIS Code for details on the disclosure items.
  • This requirement will take effect for the first annual report relating to the first financial year ending on or after 31 December 2018.
3. Additional disclosure requirements for recognised funds
  • The revised CIS Code requires additional disclosure items under the prospectus pertaining to:
    • performance fees (under Chapter 3.6(c) of the revised CIS Code)
    • financial derivatives (under paragraph 8.3 of Appendix 1 of the revised CIS Code)
    • securities lending or repurchase transactions (under paragraph 8.7 of Appendix 1 of the revised CIS Code), and
    • index fund (under paragraph 7 of Appendix 5 of the revised CIS Code).
  • This requirement will take effect on 01 February 2018, or in the case of an existing prospectus, when the prospectus is next registered by MAS on or after 01 February 2018.
4. Advertisement of authorised and recognised fund
  • The MAS requires authorised and recognised funds to ensure that advertisement on such funds are prepared in accordance with the Code of Best Practices in Advertising Collective Investment Schemes and Investment-Linked Life Insurance Policies jointly issued by Investment Management Association of Singapore (IMAS) and the Life Insurance Association and the Guidance Notes on Recommended Disclosures to Support the Presentation of Income Statistics in Advertisements issued by IMAS.
  • This requirement is set out under Chapter 4.5 of the revised CIS Code.
  • The effective date of this additional requirement will be 01 July 2018.
5. Weighted average lease expiry (WALE) disclosure
  • A Real Estate Investment Trust (REIT) will be required to calculate WALE based on the commencement of the lease.
  • This requirement is set out under paragraph 11.1(c)(v) of Appendix 6 to the revised CIS Code.
  • The effective date of this requirement will be the first annual report relating to the financial year ending on or after 31 December 2018.
Improve operational effectiveness
1. REIT meetings
  • A REIT will be required to hold its first AGM within 18 months of its authorisation instead of its constitution.
  • This requirement is set out under paragraph 4.1(c) of Appendix 6 to the revised CIS Code.
2. Redemption period for bond and money market funds
  • The period for payment of redemption proceeds will be aligned such that all funds (except property funds and hedge funds) will be required to pay out redemption proceeds within seven business days from the receipt of the redemption request.
  • This requirement is set out under Chapter 3.2(a) of the revised CIS Code.
Providing greater clarity to market practitioners
1. Clarification on “passing rent”
  • The phrase “passing rents of the underlying sub-leases” in the CIS Code will be replaced with the phrase “market rents of the underlying sub-leases at the time of entry or renewal of the master lease arrangement”, where “market rent” is defined using existing valuation standards.
  • The MAS has clarified that the intent of this proposal is for master lease rent to be compared against market rent (eg rents of comparable properties that valuers may use when valuing properties) and not actual rent. It will not prescribe the methods for justifying whether the master lease rent is at market rate.
  • Each time a master lease arrangement is entered into or an existing master lease arrangement is renewed, the REIT manager should take steps to justify that the rent is at market rates.
  • This is addressed under paragraph 11.1(o) of Appendix 6 to the revised CIS Code.
2. Issuing summary financial statements
  • The MAS has clarified that REIT managers may prepare summary financial statements to supplement the full financial statements and report.
  • The REIT manager should still prepare the full financial statements and report as MAS would require unitholders to be given the option to request for copies of the full financial statements and report within one month from the notification of the availability of the statements and reports.
  • Unitholders should also be allowed to opt for hardcopies of the full financial statements and reports for future financial years at no cost to them.
  • This is addressed under Chapter 2.3(d) of the revised CIS Code.
3. Sending annual reports by electronic means
  • A REIT may also send its accounts and reports to unitholders by electronic means.
  • The MAS does not intend to prescribe a list of permissible means of electronic transmission of reports. Emails, electronic storage medium and websites are some possible methods of electronic transmission. Other methods could also be used.
  • While REITs may distribute electronic copies instead of hardcopies, unitholders should still be given the option to request for hardcopy accounts and reports within one month from the notification of the availability of the accounts and reports.
  • The trustee should also make available, or cause to be made available, hardcopies of the accounts and reports to any unitholder who requests for them within two weeks of the request. Unitholders should also be allowed at any time to opt for hardcopies for all future reports and accounts at no cost to them.
  • This is addressed under Chapter 2.3(d) and (e) of the revised CIS Code.
4. Naming of index funds
  • The term “ETF” will be deleted from paragraph 2 of Appendix 5 to the revised CIS Code to avoid any misinterpretation that index funds must always be traded on an organised exchange or that funds traded on an organised exchange must be index funds.
Others
5. Applicability to investment-linked policies 
  • The amendments to the CIS Code will also apply to ILP sub-funds issued by insurers under MAS 307.

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This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.