MAS Imposes Business Conduct Requirements for Corporate Finance Advisers, with Effect from 1 October 2023

On 23 February 2023, the Monetary Authority of Singapore (“MAS“) issued a new Notice SFA-04-N21 on “Business Conduct Requirements for Corporate Finance Advisers” (“Notice“). The Notice imposes a mandatory baseline standard of conduct for corporate finance advisers. MAS views this exercise to be important for enhancing the overall quality of the corporate finance industry, strengthening public confidence and promoting informed decision making by investors via quality disclosures.

The Notice applies to holders of a capital markets services licence to advise on corporate finance, and persons who are exempted from holding a capital markets services licence under Section 99(1)(a), (b) or (c) of the Securities and Futures Act 2001 of Singapore in respect of advising on corporate finance, which include banks, merchant banks, and finance companies (each a “CF Adviser“) and their representatives in respect of advising on corporate finance.

Part 1 of the Notice applies when a CF Adviser advises on corporate finance and pertains to: (1) identifying and mitigating any potential or actual material conflict between the CF Adviser’s interests and the interests of the customer and disclosing, to the extent appropriate, any such conflict to the customer; and (2) ensuring proper governance and supervision of the CF Adviser’s business.

Part 2 of the Notice covers the due diligence requirements. The Due Diligence for Transactions Generally requirement in paragraph 19 of the Notice applies when a CF Adviser advises on corporate finance, other than as provided in paragraph 3(a)(i) of the Notice. The remainder of Part 2 of the Notice applies when giving advice on corporate finance in the capacity of an issue manager, sponsor or financial adviser (as the case may be) for entities listed or to be listed on the Singapore Exchange Securities Trading Limited relating to:

• an initial public offer of shares, units in a business trust or collective investment scheme (“IPOs“);
• a reverse takeover (“RTOs“); and
• a business combination entered into by a special purpose acquisition company.

The Notice comes into effect on 1 October 2023 and applies to all engagements to advise on corporate finance entered into by a CF Adviser on or after 1 October 2023. Nonetheless, CF Advisers are encouraged to start applying the requirements in the interim, particularly when advising on IPOs and RTOs.

This Update provides a summary of the salient requirements in the Notice.