Changes to controls / disclosure obligations for SCF operators

On 5 March 2021, the Monetary Authority of Singapore (“MAS”) released an updated Circular on the Controls and Disclosures to be Implemented by Licensed Securities-Based Crowdfunding Operators [CMI 27/2018] (the “Circular”), introducing certain amendments to the version first released in August 2018. 

The Circular sets out the measures that MAS expects licensed SCF operators to have in place in relation to due diligence conducted on issuers, management of defaults, and disclosures to investors. In brief, the key changes to the Circular include:

  1. Reporting obligations: Licensed SCF operators are required to submit Annex A1 (relating to debt or other interest-bearing issuances that have become 30 days past due within the preceding month) and Annex A2 (relating to updates on any issuances previously reported in Annex A1) within 5 business days of the last day of the preceding month. This replaces the earlier obligation to notify the MAS within three business days of an issuer default by filing Annex A of the earlier version of the circular.
  2. Disclosure obligations: Licensed SCF operators are required to make the disclosures of the expected rates of returns and the non-performing loan rate disclosures readily accessible in the public section of the SCF operator’s website. Licensed SCF operators should also furnish MAS a copy of the disclosures and an annual attestation that the disclosures have been made publicly available to investors. This requirement was not included in the earlier circular.
  3. Warning statements: Disclosures of expected rates of returns should be accompanied by a warning that actual returns may be lower than the expected rates of return. This is in addition to the existing requirement to include a warning that historical rates of returns may not reflect future returns.
  4. Periodic review: Licensed SCF operators are required to review periodically their policies and processes against the Circular, and take actions to address any gaps arising from the review. This requirement was not included in the earlier circular.
  5. NPL criteria: The Circular now additionally clarifies that once a loan is 30 days past due, it should be classified as a non-performing loan, even if the loan is subsequently restructured and paid off.