MAS Proposes to Introduce Due Diligence Requirements for Corporate Finance Advisers

The Monetary Authority of Singapore (MAS) issued a consultation paper on 15 December setting out proposals to raise the standards of conduct of corporate finance (CF) advisers1 by introducing baseline requirements for due diligence work performed. The consultation runs to 15 February.

CF advisers are holders of a capital markets services (CMS) licence and banks, merchant banks and finance companies that are exempted from holding a CMS licence to undertake the regulated activity of advising on corporate finance.

The proposed requirements set out the minimum standards that CF advisers should adhere to when conducting due diligence on CF transactions and are designed to improve the quality of disclosures from entities seeking to raise funds from the public, allowing investors to make better informed decisions. CF advisers are currently only required to have effective internal controls to address the risks associated with their activities and mitigate conflicts of interests that may arise.

Under the proposal, CF advisers will be required to:

•  Exercise reasonable judgment in determining the scope of the due diligence work to be performed on a CF transaction.
• Assess the veracity of information obtained in the course of their due diligence.
• Satisfy additional requirements to safeguard the interests of retail investors in respect of their role as issue managers of initial public offerings (IPOs), such as assessing the suitability of listing the applicant and conducting an independent review of the due diligence performed by the team responsible for advising on a specific IPO.

“Corporate finance advisers play an important gatekeeping role in safeguarding the integrity of our capital markets,” said Lim Tuang Lee, Assistant Managing Director (Capital Markets) MAS. “The proposed requirements are consistent with best practices in major jurisdictions and seek to strengthen investor confidence in our capital markets.”