Martin Lee @ Sg
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Proposed Amendments to the Code on Collective Investment Schemes

The Monetary Authority of Singapore (MAS) has released a consultation paper on proposed amendments to the Code on Collective Investment Schemes (Code). The Code prescribes best practices in the management, operation and marketing of collective investment schemes (CIS) authorised under the Securities & Futures Act.

mas-code-on-collective-investmentThe proposed amendments aim to provide clarity and to increase the flexibility for managers in managing their funds, and enhance protection for investors. They include:

i. Introducing a list of permissible investments and accompanying criteria to enhance clarity in the application of the liquidity and diversification limits.

ii. Strengthening safeguards on the use of financial derivatives through prescription of counterparty limits and acceptable forms of collateral used to mitigate counterparty risks.

iii. Introducing additional guidelines on the use of the commitment approach and Value-at-Risk (VaR) method for calculating exposures to financial derivatives.

iv. Enhancing existing guidelines on funds’ securities lending activities through comprehensive requirements on the counterparty, custodian and the use of collateral. This is in the light of the heightened attention on counterparty and liquidity risks as a result of the recent global financial crisis.

v. Establishing new investment guidelines for funds seeking to track indices, introducing principles for the naming of funds and requirements to standardise the methods used for calculating performance fees where the fund manager decides to impose such fees.

vi. Modifying existing operational requirements, including allowing the sending of accounts and annual reports to unitholders by electronic means with certain exceptions as long as unitholders are notified and do not object to it.

The proposed amendments will also apply to funds offered via an investment-linked life insurance policy (ILP). As a transitional measure, MAS proposes to give fund managers and approved trustees for CIS three months to comply with the revised Code.

The full consultation paper (82 pages!) can be downloaded here:

Proposed Amendments to the Code on Collective Investment Schemes

Feedback can be sent to [email protected] or (+65) 6225-1350 (fax) by 25 June 2010.

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