30 January 2019
On 18 December 2018, the Monetary Authority of Singapore (“MAS”) issued a set of Frequently Asked Questions on the Definition of Accredited Investor and Opt-In Process (“FAQs”). Among other things, the FAQs provide clarity on the interpretation of the term “accredited investor” (“AI”) under the Securities and Futures Act (“SFA”) and the Securities and Futures (Classes of Investors) Regulations 2018 (“Regulations”), as well as on the opt-in regime as effected by the Regulations. In particular, MAS stated that it would extend the transition period for financial institutions (“FIs”) to implement the opt-in regime for existing clients by three months, such that FIs will have up to 7 April 2019, instead of 8 January 2019, to provide existing clients with the option to opt out of being treated by the FI as an AI, subject to these clients meeting the revised definition of an AI. Consequently, on 8 January 2019, the Regulations were amended to put these changes into effect.
Revised definition of AI and new opt-in regime
Previously, individuals qualified as AIs under the SFA if: (a) their net personal assets exceeded in value S$2 million (or its equivalent in a foreign currency), or (b) their income in the preceding 12 months was not less than S$300,000 (or its equivalent in a foreign currency). With the amendments introduced by the Securities and Futures (Amendment) Act 2017 which came into effect on 8 October 2018, the definition was changed in two ways:
- first, in determining an individual’s net personal assets, the value of the individual’s primary residence (net of any secured loan) can only contribute up to S$1 million of the S$2 million threshold;
- secondly, individuals may also qualify as AIs if they have more than S$1 million (or its equivalent in a foreign currency) of financial assets (such as bank deposits) net of any related liabilities.In addition, from 8 January 2019, under the Regulations, the following persons will also qualify as AIs:
- the trustee of a trust:
- all the beneficiaries of which are AIs;
- all the settlors of which: (a) are AIs, (b) have reserved to themselves all powers of investment and asset management functions under the trust, and (c) have reserved to themselves the power to revoke the trust;
- the subject matter of which exceeds S$10 million (or its equivalent in a foreign currency) in value;
- a corporation the entire share capital of which is owned by one or more persons, all of whom are AIs (no longer limited to a corporation, the sole business of which is to hold investments and the entire share capital of which is owned by one or more persons, each of whom is an AI); and
- a person who holds a joint account with an AI, in respect of dealings through that joint account (“joint accountholder”).
Corporations and other entities with net assets exceeding S$10 million in value (or its equivalent in a foreign currency), as well as partnerships (other than limited liability partnerships) in which every partner is an AI, continue to qualify as AIs.
In addition, the Regulations provide the framework for a new opt-in regime for AIs, which had originally been scheduled to come into force on 8 January 2019. Under this regime, a person (whether an individual or otherwise) may only be treated as an AI for the purpose of certain provisions of the SFA and the Securities and Futures (Licensing and Conduct of Business) Regulations if that person had opted to be treated by the counterparty as an AI in accordance with the procedures set out in the Regulations. Notwithstanding the opt-in requirement, counterparties may continue to treat as AIs existing clients which satisfy the revised definition of AI, provided that certain disclosures have been provided to them in writing and they have not opted out thereafter. In addition,
if these existing clients are individuals or joint accountholders, from 8 July 2020, they must opt in in order to continue to be considered to be AIs therefrom.
The definition of “institutional investor” under the SFA was also amended on 8 October 2018. The definition now includes persons professionally active in the capital markets such as FIs regulated by foreign regulators and sovereign wealth funds. However, statutory boards, other than prescribed statutory boards, are no longer deemed to be institutional investors.
Extension of deadline for compliance in relation to AIs
Previously, the Regulations provided that if an FI is able to confirm that an existing client satisfies the revised definition of AI, the FI will be able to treat the client as an AI on or after 8 January 2019 (but only until 8 July 2020 for AIs that are individuals or joint accountholders) so long as the client has been given the option to opt out of being treated as an AI.
Following feedback and requests from FIs for additional transition time, MAS has extended the transition by a further three months. Therefore, under the revised Regulations, FIs will have up to 7 April 2019 to provide existing clients with the option to opt out of being treated by the FI as an AI, subject to these clients meeting the revised definition of an AI. MAS clarified that there will be no further extension after 7 April 2019.
For new clients, the changes to the definitions of AIs with respect to individuals under the SFA, and with respect to other clients under the Regulations, continue to take effect from 8 October 2018 and 8 January 2019 respectively. Accordingly, FIs that are on-boarding new clients must ensure that the clients meet the revised definitions of AI from the above-mentioned dates.
MAS also clarified that the transition time for obtaining opt-in from new clients who are AI-eligible to be treated as AIs will similarly be extended by three months, i.e. FIs need only obtain explicit opt-in as AIs from AI clients onboarded from 8 April 2019.
The Securities and Futures (Classes of Investors) Regulations 2018 can be accessed from the Singapore Statutes Online website sso.agc.gov.sg.