Private placement rules and law in Singapore

In Singapore, the rules governing the offers of funds or collective investment schemes (“CIS”) are set out in the Securities and Futures Act 2001 of Singapore (“SFA”) and its subsidiary regulations and guidelines, and the regulatory authority over the investment funds market is the Monetary Authority of Singapore (“MAS”). Broadly speaking, the offer of units in a CIS and the marketing or distribution of such units will attract regulatory requirements from both a product and activity perspective under the SFA. 

In general, any offer of a CIS to the public (retail investors) in Singapore needs to be authorised (if the CIS is constituted in Singapore) or recognised (if the CIS is constituted outside Singapore) by the MAS. A substantial proportion of retail CISes traditionally take the form of unit trusts.  

• Authorisation: Criteria for authorisation includes that the MAS is satisfied that: (i) the manager holds a capital markets services licence and is fit and proper, and (ii) there is a trustee approved under the SFA.  
• Recognition: The MAS may recognise a CIS if, amongst other things: (i) such foreign CIS is regulated and supervised in a manner comparable to authorised Singapore CISes, (ii) the manager is licensed or regulated in its principal place of business and is fit and proper, and (iii) there is an appointed Singapore representative. The MAS has recognised foreign funds constituted as Undertakings for Collective Investments in Transferable Securities (UCITS) in Luxembourg, the United Kingdom, Ireland, France and Germany, as well as funds that have been assessed as suitable to be qualifying CIS under the ASEAN CIS framework. 

Such offers of an authorised or recognised CIS in Singapore must be made in or accompanied by a prospectus registered by the MAS, which should comply with disclosure requirements prescribed by the MAS, together with accompanying product highlights sheets. The CIS should also comply with the Code on Collective Investment Schemes issued by the MAS. 

An offer of interests in a CIS may be made without the need to comply with the above offering requirements if any of the following exemptions set out in the SFA are applicable: 

1. Small offers 
   This exemption applies to personal offers of units in a CIS where the total amount raised in respect of such offers within any period of 12 months does not exceed S$5 million or such other amount as the MAS may prescribe. A personal offer is one that is made to a person who is likely to be interested in that offer, having regard to (i) any previous contact, (ii) any previous professional or other connection, or (iii) any previous indication of interest in offers of that kind.  
2. Private placement 
   This exemption applies to offers of units in a CIS where the offers are made to no more than 50 persons within a period of 12 months. The 50 persons’ limit is based on the number of persons such offer is made to, and not the number of acceptances.   
3. Offers to institutional investors 
   This exemption applies to offers of units in a CIS which are made solely to institutional investors, as defined in the SFA. Institutional investors include the Singapore Government, prescribed statutory boards, sovereign wealth funds, pension funds, central banks, central governments, prescribed multilateral agencies or international organisations and certain regulated financial institutions in Singapore (e.g. licensed banks).  
4. Offers to accredited investors and certain other persons 
   This exemption applies to offers of units in a CIS which are made solely to: 
   1. Accredited investors or certain relevant persons who are related to the offeror; or  
   2. A person who acquires the units as principal at a consideration of not less than S$200,000 for each transaction.  

Accredited investors include (i) individuals whose net personal assets exceed S$2 million or whose net financial assets (e.g. bank deposits and prescribed investment products) exceed S$1,000,000 or whose income in the preceding 12 months is not less than S$300,000 and (ii) corporations with net assets exceeding S$10 million. Apart from meeting these requirements, such investor must also opt-in to be treated as an accredited investor in accordance with the relevant regulations. 

CISes made available under this exemption are “restricted schemes”, which must be notified to the MAS and be entered into the MAS’ list of restricted schemes prior to any offers being made. Key requirements for a restricted scheme to be entered into MAS’ list are that (i) the manager is licensed or regulated in the jurisdiction of its principal place of business and be fit and proper, and (ii) the offer is accompanied by an information memorandum that contains salient information prescribed under the relevant regulations. A copy of the information memorandum must be submitted to the MAS. 

Reliance on the abovementioned exemptions is subject to compliance with conditions including prohibitions against advertising and the incurrence of selling or promotional expenses other than those incurred for administrative or professional services, or by way of commission or fee for services rendered by prescribed persons.  

Entities who carry on business in marketing CIS will be required to hold a capital markets services licence in dealing in capital markets products that are CIS under the SFA, unless exempted for example, where such person carries on business in dealing in capital markets products that are units in a CIS for a customer who is an institutional investor.  

As the SFA has extra-territorial effect, an overseas intermediary that operates from wholly outside Singapore should nonetheless consider if such activity would nonetheless have a substantial and foreseeable effect in Singapore, which would extend the jurisdiction of the SFA to such activity.