The Monetary Authority of Singapore (“MAS”) is proposing to introduce due diligence requirements for holders of a capital markets services (“CMS”) licence and banks, merchant banks and finance companies exempt from holding a CMS licence that undertake the regulated activity of advising on corporate finance (“CF advisers”), in a move to improve industry standards and raise the minimum standards of conduct of CF advisers, strengthen public confidence and promote informed decision making by investors through quality disclosures.

The proposed requirements set out the minimum standards which CF advisers should adhere to when conducting due diligence on CF transactions. Part I (General Requirements) of the Notice sets out general requirements which apply when CF advisers advise on corporate finance, while Part II (Listing Applicants) sets out additional requirements for CF advisers acting as issue managers (“IMs”) for initial public offerings (IPOs) on the Singapore Exchange Securities Trading Limited (“SGX-ST”) or reverse takeovers and very substantial acquisitions entered or to be entered into by an entity listed on the SGX-ST.

An outline of the key proposed requirements under the new Notice is set out below.

General due diligence requirements

• Implementing policies, procedures and controls: A CF adviser must develop and implement policies, procedures and controls to meet all the requirements of the Notice, monitor the implementation and periodically consider the need to enhance such policies, procedures and

• Acting with due care, skill and diligence: A CF adviser must act with due care, skill and diligence including exercising reasonable judgement in determining the nature and extent of due diligence work to be performed for a transaction and assessing the accuracy and completeness of representations and information made or given by its customer and conducting the appropriate verification of such

• Managing conflicts of interest: A CF adviser must, among other things, identify, mitigate and disclose to its customers potential, actual or perceived material conflicts of interest between the interests of its customers and those of the CF adviser or its related corporation. Where a CF adviser or its related corporations also conduct other activities in relation to the offering process (e.g. issue of research reports) it must, among other things, have in place controls for that other activity. Further, the CF adviser must put in place effective safeguards to prevent the disclosure of confidential or price sensitive information by its directors, employees, or representatives or other agents who receive such information when advising on corporate finance, to personnel carrying on other

• Governance and supervision: There must be an adequate framework for senior management (the person principally responsible for the day-to-day management of the relevant functions which advise on corporate finance) to have oversight over matters including acceptance of an engagement to act as a CF adviser, appointment of the transaction team, and the proposed due diligence plan for each specific The CF adviser must also ensure adequate supervision of the performance of the representatives who advise on corporate finance, including their performance of due diligence work for each specific transaction. Matters such as material issues relating to non-compliance with relevant legal and regulatory requirements, conflicting information from a customer or other persons, suspicious circumstances and material issues that may be prejudicial to the transaction must be reported to senior management and there must be clear reporting lines to escalate such reportable matters.

• Keeping records: A CF adviser must prepare, maintain and retain records of all data, documents and information that it is required to obtain or produce to meet the requirements under the Notice.