Last month, the Monetary Authority of Singapore ("MAS") implemented and published new prescribed forms to be used when making change of control applications to MAS. Change of control applications are applications for regulatory approval to enter into any arrangement that has the effect of enabling a person to take effective control of a regulated financial institution.
The new forms apply to change of control applications to MAS where the target entity is one of the following: (a) a holder of a capital markets services licence under the Securities and Futures Act (Chapter 289, Singapore Statutes); (b) a licensed financial adviser under the Financial Advisers Act (Chapter 110, Singapore Statutes); (c) a registered insurance broker under the Insurance Act (Chapter 142, Singapore Statutes); or
(d) a licensed trust company under the Trust Companies Act (Chapter 336, Singapore Statutes).
Previously, no specific forms were prescribed for such applications. The new prescribed forms appear to be a bid to standardise the information required to be submitted as part of such applications.
A consequence of this development is that would-be applicants are now required to expend more time and effort to gather supporting information and to populate the form correctly.
Each of the new forms broadly follow the same structure. Apart from basic information that applicants would already have provided in the past (eg the identity and relevant particulars of the proposed controller, the reason for the change of control, and illustrations as to the share ownership position before and after the change of control), the new forms require a host of additional information.
Firstly, the applicant will be required to indicate if it (or its related entity) would be willing and able to provide MAS with a letter of responsibility. The letter of responsibility is typically required by MAS in licensing application cases. Its purpose is to give MAS an added layer of assurance that the licensed entity will be provided with financial support if the licensed entity encountered financial difficulty in the course of its operations in Singapore. The letter will typically be given by the licensed entity's parent company. Apart from indicating willingness to provide such a letter of responsibility, financial information relating to the company that will be issuing the letter of responsibility will also have to be provided.
Secondly, the forms will also incorporate a fit and proper questionnaire. This is a feature that was previously found in primary licensing application forms. While the concept of a criteria for fitness and probity is nothing new to the local financial industry, considerable care is nevertheless needed in responding to the questions, and supporting information and documentation must be gathered and furnished if questions are answered in a certain way.
While these new forms will hopefully streamline change of control applications (and hopefully expedite the processing of such applications by MAS), would-be applicants should note that they will likely need to set aside more resources to put together the information package that will go to the MAS as part of the change of control application.
It should be borne in mind that the legal threshold for triggering change of control applications is very low under the statutory regulatory regimes mentioned above. For instance, under section 97A of the Securities and Futures Act, a person must obtain the approval of MAS before he enters into any arrangement by virtue of which he would, if the arrangement is carried out, obtain effective control of the holder of a capital markets service licence. In turn, the notion of an arrangement is defined very widely to cover not merely actual agreements, but also informal understandings, invitations to make offers, pre-emption right and trust arrangements. Thus, it is not compliant for parties to delay approaching MAS until after the acquisition agreement has been entered into, on the basis that closing of the transaction is conditional upon regulatory approval being obtained for the change of control.
The introduction of these new forms will have significant implications in M&A transactions that involve a financial institution that is licensed in Singapore by MAS.
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