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.
2. Since the issuance of the Code in May 2002, MAS has made various amendments in 2002, 2005 and 2006 in response to feedback from the fund management industry. With the increased pace of product development in recent years, MAS is of the view that it is now timely to undertake a comprehensive review of the Code. The current review focuses on investment guidelines and on ensuring that the regulatory regime for CIS keeps pace with product innovation and industry developments, as well as regulatory developments in major fund jurisdictions.
3. The 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.
4. In developing this set of proposals, MAS has considered the views and comments from market practitioners and industry associations. MAS has sought to balance the need to keep pace with international developments in fund management with that of ensuring that the guidelines continue to afford investors confidence in the regulatory framework for Singapore retail funds.
5. 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.
6. MAS invites interested parties to give their views and comments on the proposals contained in the consultation paper by 25 June 2010. (Click here to view the consultation paper)
2. Since the issuance of the Code in May 2002, MAS has made various amendments in 2002, 2005 and 2006 in response to feedback from the fund management industry. With the increased pace of product development in recent years, MAS is of the view that it is now timely to undertake a comprehensive review of the Code. The current review focuses on investment guidelines and on ensuring that the regulatory regime for CIS keeps pace with product innovation and industry developments, as well as regulatory developments in major fund jurisdictions.
3. The 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.
4. In developing this set of proposals, MAS has considered the views and comments from market practitioners and industry associations. MAS has sought to balance the need to keep pace with international developments in fund management with that of ensuring that the guidelines continue to afford investors confidence in the regulatory framework for Singapore retail funds.
5. 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.
6. MAS invites interested parties to give their views and comments on the proposals contained in the consultation paper by 25 June 2010. (Click here to view the consultation paper)
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