Regulations, Regulations, Regulations!
Hong Kong and Singapore
MANDATORY DISCLOSURE RULES
Came into effect: June 2018
In a step up from the Common Reporting Standard (CRS), which is an ongoing regulation, the OECD introduced the mandatory disclosure rules this year.
The new rules will allow tax administrations to share information on arrangements that purport to circumvent the CRS as well as on structures that disguise the beneficial owners of assets held offshore.
As a result, national authorities can pass on the information of IAMs that they deem are involved in any such scheme.
CYBER HYGIENE PROPOSAL
Consultation paper released in: September 2018
In September, the Monetary Authority of Singapore issued a consultation paper outlining essential cybersecurity measures that should be taken by all financial institutions.
The measures include:
– Addressing system security flaws in a timely manner
– Establishing and implementing robust security for systems
– Deploying security devices to secure system connections
– Installing anti-virus software to mitigate the risk of malware infection
– Restricting the use of system administrator accounts that can modify system configurations
– Strengthening user authentication for system administrator accounts on critical systems.
VARIABLE CAPITAL COMPANY
Passed into law: October 2018
This year, Singapore introduced a new company structure for investment funds, and some IAMs are considering utilising it. The key highlights of the new Variable Capital Company (VCC) structure are:
– It can be used for open-ended and closed-end investment funds
– It can be used for traditional and alternative strategies
– Funds can be established as standalone or umbrella vehicles
– Umbrella funds can have multiple sub-funds that may have different investment approaches, investors, assets and liabilities
– Foreign corporate fund structures similar to VCCs can re-domicile in Singapore
ACCREDITED INVESTOR REGIME
Comes into effect: January 2019
The Securities and Futures (Amendment) Act 2017 passed by Singapore’s parliament has introduced changes to the definition of accredited investors (AI) in Singapore in a bid to protect investors.
Coming into effect in January 2019, an individual will qualify as an AI if their net personal assets exceed SGD 2 million. Under the new regime, of the minimum SGD 2 million, less than half can be net equity from the individual’s primary residence.
The new rules include an opt-in regime for AIs. The clause will require all financial institutions to treat new customers who are AI-eligible as retail investors by default, unless they opt in as AIs each year.
NEW CODE OF CONDUCT
Came into effect: August 2018
Starting 17 August, the Hong Kong regulator restricted the use of the term ‘independent’ by intermediaries. Product distributors will no longer be permitted to call themselves independent if they receive fees, commissions or any other monetary benefits paid or provided for distributing an investment product.
Independent intermediaries will also not be allowed to have ‘close links’ or other legal or economic relationships with product issuers that are likely to impair their independence in selecting a particular investment product, class of investment product or product issuer.
NEW AML GUIDELINES
Came into effect: November 2018
This year, Hong Kong’s Securities and Futures Commission amended its anti-money laundering (AML) and counter-terrorist-financing guidelines for financial institutions in accordance with international standards.
The categories of politically exposed persons (PEPs) have been expanded beyond domestic and foreign PEPs to include officials who hold prominent posts in international organisations.
As a result, if IAM clients hold a prominent public post in a foreign government and also have a high-profile role in an international organisation, they will have to be treated as both foreign PEPs and international organisation PEPs by the custodian private bank.
REGULATION OF VIRTUAL ASSETS
Issued in: November 2018
While most of the surveyed IAMs in Hong Kong don’t actively advise on cryptocurrencies, many are watching the space.
Last month, the Hong Kong regulator said the distribution of funds investing in virtual assets will trigger the Type 1 licensing requirement for dealing in securities. This is regardless of whether the underlying cryptocurrencies constitute securities or futures contracts as defined by the Securities and Futures Ordinance.
Singapore’s government, meanwhile, is regulating virtual assets that qualify as securities. It is also regulating virtual currency intermediaries to monitor potential money laundering and terrorism financing risks.