Singapore's Regulatory Framework for Sovereign Green Bond Issuance – Key Features of Singapore Green Bond Framework
Financing is critical to propel sustainable investments and projects. The Monetary Authority of Singapore (“MAS“) has developed the Green Finance Action Plan to promote financing for sustainable development.
In the coming months, MAS (on behalf of the Singapore Government) will be issuing the first sovereign green bond under the Significant Infrastructure Government Loan Act 2021 (“SINGA“). Ahead of this, the Singapore Ministry of Finance published the Singapore Green Bond Framework (“Framework“) on 9 June 2022 that sets out a regulatory and governance framework for green bond issuances under SINGA. Green bonds issued under the Framework should conform with the following four core components:
- How proceeds are used. Proceeds from Singapore sovereign green bonds will be used to finance specified eligible expenditures (“Eligible Green Expenditures“) that are set out in eight categories: (i) Renewable Energy; (ii) Energy Efficiency; (iii) Green Buildings; (iv) Clean Transportation; (v) Sustainable Water and Wastewater Management; (vi) Pollution Prevention, Control and Circular Economy; (vii) Climate Change Adaptation; and (viii) Biodiversity Conservation and Sustainable Management of Natural Resources and Land Use.
- How projects are evaluated and selected. The Green Bond Steering Committee (“GBSC“) has the overall responsibility for overseeing and approving key decisions related to the green bonds issued under the Framework.
- How proceeds will be managed. The Singapore Government will apply the net proceeds from the green bonds to projects approved by GBSC.
- Post-issuance allocation reporting and impact reporting. To ensure transparency, accountability and to keep investors and stakeholders informed, the Singapore Government intends to report on how the proceeds from green bond issuances are allocated and the associated environmental benefits and social co-benefits (where possible) of the Eligible Green Expenditures.
For more information, click here to read our Legal Update.
Framework for Conditional Fee Agreements in Singapore Comes into Operation
Conditional fee agreements (“CFAs“), which were previously prohibited under Singapore law, are now allowed for specific contentious proceedings. On 4 May 2022, the framework for CFAs in Singapore came into operation, opening the door for lawyers and clients to enter into a wider range of permitted fee arrangements.
This development has been keenly anticipated in the legal industry, serving to enhance litigation funding in Singapore and support the dispute resolution needs of businesses and individuals. The costs of traversing a commercial dispute can be potentially prohibitive. With the introduction of CFAs, disputants with strong claims will have greater access to justice, being able to pursue their claims without being hindered by cash flow issues.
What is a CFA? – Traditionally, in lawyer-client fee agreements for dispute resolution, lawyers were prohibited from having fees contingent on the outcome of a contentious matter. The new CFA framework allows for lawyers and clients to enter into CFAs, in which lawyers may receive payment of all or part of their legal fees only in specified circumstances (for example, where the claim is successful).
In what situations are CFAs allowed? – The CFA framework applies to Singapore lawyers and law practices, as well as certain registered foreign lawyers and foreign law practices. CFAs are only applicable to certain disputes, including international and domestic arbitration proceedings and proceedings in the Singapore International Commercial Court, as well as related proceedings.
What are the requirements of a CFA? – The CFA framework sets out certain requirements for a valid CFA. This includes requirements on the form of the CFA, the information that must be provided to the client, and the inclusion of certain prescribed terms.
For more information, click here to read our Legal Update.
Licensing Framework for Cybersecurity Service Providers Comes into Operation
The Cybersecurity Agency of Singapore (“CSA“) has announced the launch of the licensing framework for cybersecurity providers (“Framework“), which has taken effect from 11 April 2022. The Framework imposes a licensing requirement for the provision of prescribed cybersecurity services.
The Framework aims to better safeguard consumers’ interests and address the information asymmetry between consumers and cybersecurity service providers. It also seeks to improve service providers’ standards and standing over time.
The Framework has been enacted via Part 5 and the Second Schedule of the Cybersecurity Act 2018, which came into operation on 11 April 2022. Subsidiary legislation such as the Cybersecurity (Cybersecurity Service Providers) Regulations 2022 has also been enacted as part of the Framework.
CSA has set out the timeline for the relevant cybersecurity service providers to comply with the licensing requirements of the Framework:
- 11 April 2022: No person may provide a licensable cybersecurity service without a cybersecurity service provider’s licence from 11 April 2022.
- 11 October 2022: Existing cybersecurity service providers who are already engaged in the business of providing licensable cybersecurity services must apply for a licence by 11 October 2022. If the licence application is made by 11 October 2022, the service provider may continue to provide its service until a decision on its application has been made.
- The licence is valid for a period of two years, and an application for renewal should be made no later than two months before the expiry of the licence.
For a start, CSA will license two types of cybersecurity service providers: (i) managed security operations centre monitoring services; and (ii) penetration testing services.
The Framework contains certain key conditions, such as those relating to:
- Procedural and information requirements for licence applications;
- Keeping of records;
- Notification on changes to information about the licencee;
- Professional conduct of licensees;
- Provision to the licensing officer of information relating to the cybersecurity service.
For more information, click here to read our Legal Update.
Providing Digital Payment Tokens in Singapore: Regulatory Issues to Consider
Broadly, a digital token is a digital representation of the value or rights of the holders of the token to receive a benefit or perform specified functions. The most prominent type of digital tokens is digital payment tokens (“DPTs“) (commonly referred to as “cryptocurrency”) that can be used to facilitate payment for goods and services.
Depending on the regulatory characterisation of digital tokens, some digital tokens are regulated in Singapore. It is important to note that the Monetary Authority of Singapore (“MAS“) has expressed and cautioned that the regulatory characterisation of digital tokens goes beyond the labels.
Definition: DPTs vs. E-money
The provision of DPT services and e-money issuance services in Singapore are regulated under the Payment Services Act 2019 (“PS Act“).
DPTs and e-money are, are by their statutory definitions, differentiated given the different nature and features of these products. Under the PS Act, e-money issuance service providers are subject to a wider ambit of requirements as compared to DPT service providers.
Both e-money issuance and DPT services licensees are regulated for money laundering/terrorism financing risks as well as technology and cyber security risks. However, while e-money issuance services providers are also regulated for user protection risks, DPT services providers are not.
Regulatory Characterisation: Is Stablecoin a DPT or E-money?
It would be useful at this juncture to highlight recent regulatory developments and clarifications from MAS regarding stablecoins. Stablecoins is a type of cryptocurrency that is backed by fiat currency, a commodity or a basket of assets, rendering its value to be less volatile than traditional cryptocurrencies. MAS recently clarified that stablecoins are not the same as e-money in the sense that e- money is a digital representation of a currency. Certain stablecoins may fall within the definition of DPTs.
For more information, click here to read our Legal Update.
Impending Changes to Tax Incentive Schemes for Family Offices
There is a growing need amongst high-net-worth families for institutional management of their private wealth. Family offices address this need, being investment vehicles for structuring the way families invest and transfer their wealth to future generations.
Riding this wave, Singapore has positioned itself as the jurisdiction of choice for family offices in Asia thanks to its position as an international financial hub, a reputation for political and operational stability, and a clear tax and regulatory regime, among other factors.
There are two tax incentive schemes available under the Income Tax Act for family offices in Singapore, where exemption of income applies to:
- income of a company incorporated and resident in Singapore that arises from funds managed by a fund manager in Singapore (previously known as the Section 13R scheme); and
- income arising from funds managed by a fund manager in Singapore (previously known as the Section 13X scheme).
To improve the professionalism of family office professionals in Singapore, and to enhance the positive spillovers to the Singapore economy, the Monetary Authority of Singapore (“MAS“) has updated the conditions for the above schemes (now known as the “S13O Scheme” and “S13U Scheme“, respectively). These are set out in the “S13O & S13U Application Process for Family Offices – Guidelines for Advisors” (“Guidelines“), which came into effect on 18 April 2022 and incorporate the following changes:
- Updated conditions for eligibility;
- Changes to Annex A, which sets out the information required for preliminary submissions for the Schemes;
- Changes to Annex B, which sets out the supporting documents required; and
- Closing of the interim arrangement in lieu of employment passes (“Interim Arrangement”). In light of the relaxing of travel restrictions, the Interim Arrangement for the S13U Scheme has been closed.
The Guidelines will apply to applications submitted on or after 18 April 2022, with some exceptions.
For more information, click here to read our Legal Update.
Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice
