December 22, 2016

RHTLaw Taylor Wessing Head of Regulatory Practice Nizam Ismail featured in Thomson Reuters

RHTLaw Taylor Wessing’s Head of Regulatory Practice Nizam Ismail was featured in an article published in Thomson Reuters titled “MAS's new accredited investor definition will require documentation and system change”. The article was first published on Thomson Reuters Accelus Regulatory Intelligence and Compliance Complete. MAS's new accredited investor definition will require documentation and system change Source: Copyright © Thomson Reuters 2016 Date: 22 December 2016 Author: Patricia Lee Singapore-based financial institutions can expect a degree of change to their documentation, systems, and policy and procedures following recent refinements to the definition of accredited investors at the first reading in parliament last month. The refinements to the definitions of accredited investors (AIs) and institutional investors (IIs) were part of the Monetary Authority of Singapore's proposed changes to its capital markets regulatory framework and followed a consultation paper issued on July 21, 2014. The second reading in parliament is expected to take place sometime this month or January 2017. The Securities and Futures (Amendment) Bill 2016 seeks to better reflect categories of non-retail investors identified based on their wealth or income and financial knowledge. Under MAS's existing capital markets regulatory framework, regulatory safeguards have sought to protect primarily retail investors. Intermediaries have so far been exempted from certain requirements if their customers are non-retail investors considered to be investment-savvy. Shift in regulatory thinking Under the proposed definition of AIs, the wealth criteria has been tightened such that the net equity of the individual’s primary residence can only contribute up to S$1 million of the current S$2 million net personal assets threshold. Alternatively, individuals will be able to qualify as AIs if they have S$1 million of financial assets (net of any related liabilities). Individuals whose wealth is largely based on their primary residence with little liquid assets will no longer qualify as accredited investors. Nizam Ismail, head of regulatory practice at RHTLaw Taylor Wessing in Singapore, said the regulatory thinking is that AIs were previously considered to be able to look after their interests by virtue of their wealth but such thinking has now shifted. Even if an investor meets the net asset or income test, he or she will no longer be automatically treated as an accredited investor unless they actively opt in to be one, in which case, they will lose protection from the regulatory safeguards accorded to retail investors. Reassessing customers, reviewing processes, policy and procedures What is most striking about the new accredited investors opt-out regime is that financial institutions, in particular, private banks, fund managers and wealth managers, can expect a good amount of work to be done, including re-assessing existing customers who are accredited investors and reviewing internal processes, policy and procedures to align them with the new requirements, said Hemali Mehta, senior consultant at Bovill in Singapore. Accredited investor reassessments will cover a number of areas including product suitability, risk profile and financial conditions. "For these financial institutions, they have to re-assess their existing AI clients to find out whether these clients want to be considered AIs and they have to notify them that they have the option to opt out of the accredited investor status. Full disclosure will have to be made to these investors that certain safeguards may not be available to them if they remain accredited investors," she said. Retail investor status as a baseline for new customers Mehta also pointed out that some financial institutions which are only licensed to deal with accredited and institutional investors may face the prospect of having to exit the relationship if some existing customers chose to opt out of becoming accredited investors. New AI-eligible customers whom financial institutions are onboarding for the first time will be treated as retail investors as a baseline unless they want to be treated as accredited investors, in which case they will have to opt in, she said. Mehta said MAS has been considerate and will not expect financial institutions to unwind past transactions involving products previously offered to customers when they were treated as accredited investors. MAS' proposals to introduce the enhanced safeguards under the new AI regime, she said, was a good move and was in line with similar regimes adopted in Europe and Hong Kong. AIs investing in Singapore dollar bonds MAS' proposed changes to the definition of accredited investors also took into consideration past instances where Singapore dollar bonds were sold to such accredited investors, said Lim Sin Teck, director, Morgan Lewis Stamford LLC in Singapore. While there have been no major issues so far, a number of bond issuers from the shipping and oil and gas sectors were known, in recent months, to be having difficulty making principal and interest repayments to their bondholders or otherwise in breach of certain covenants. "A substantial number of the accredited investor bondholders in the Singapore dollar bond market are individuals who find themselves stuck with defaulted bonds and are having difficulty recouping their investment. Accredited investors are meant to be investors with the ability to understand and, if acceptable to them, withstand and take on the investment risk, but in many cases, their investment evaluation process is at the level of retail investors and so they may not have the investment appetite nor investment sophistication that expected of such high-risk bonds," he said. Lim said some retirees, who may not necessarily be wealthy but own high value property, may seek high returns from their investment, but they may not be able to appreciate the risk in such bonds. MAS has therefore proposed to refine the definition of accredited investors and to limit the value of the primary residence of investors when financial institutions determine whether the former falls within the scope of accredited investors. ·  Patricia Lee is South-East Asia editor at Thomson Reuters Regulatory Intelligence in Singapore. She also has responsibility for covering wider G20 regulatory policy initiatives as they affect Asia.
December 22, 2016

RHTLaw Taylor Wessing Partner Eugene Quah featured in Singapore Business Review

RHTLaw Taylor Wessing’s Partner Eugene Quah was quoted in an article published in Singapore Business Review titled “Third-party funding for arbitrations”. The article was first published in the December 2016-January 2017 edition of Singapore Business Review. Third-party funding for arbitrations New legislation is seen to raise Singapore’s profile as an international arbitration hub. Source: Singapore Business Review © 2016 Charlton Media Group Date: December 2016-January 2017 Edition The Ministry of Law has submitted for its First Reading in the Parliament the Civil Law (Amendment) Bill 2016 and Civil Law (Third Party Funding) regulation. The bill states that third-party funding (TPF), which had previously been restricted for disputes, will be permitted for international commercial arbitration proceedings. TPF gives the means for a party to litigate or arbitrate without having to spend money for it. The Ministry of Law says introducing TPF in Singapore, which the body notes is a leading centre for international commercial arbitration, will enable international businesses to use funding tools available to them in other centres. It also says this will promote Singapore’s growth as a leading international arbitration venue. The legal experts interviewed for this article also note how TPF can prove to be beneficial to Singapore’s standing in the world as an arbitration hub. What are your thoughts on the proposed changes under the Civil Law (Amendment) Bill 2016 enacting a framework for third-party funding in Singapore, which will give businesses an additional financing option for international commercial arbitration? Eugene Quah, litigation & dispute resolution partner, RHTLaw Taylor Wessing LLP, welcomes the development. “Litigation or arbitration costs are big ticket extraordinary expenses that many businesses are not sufficiently well-resourced to bear,” says Quah. “The changes will open up access to a source of capital previously unavailable in this jurisdiction.” Quah also notes that third-party funding can inject a greater degree of objectivity into the assessment of the merits of a party’s claim: “The claimant may have unrealistic expectations of his chances of success, but the third-party funder is a calculated risk-taker and will not fund an unmeritorious claim.” The proposed changes can be seen as a positive development for businesses, says Deborah Barker, managing partner, Withers KhattarWong. “For end users of the arbitration process, the changes will reduce (or even eliminate) the risk that third-party funding arrangements will be relied on as a basis for judicial intervention on the ground of public policy, or as a premise for an application to set aside the award.” Marina Chin, joint managing partner, Tan Kok Quan Partnership, says the bill is part of Singapore’s natural progression as a dispute resolution hub alongside others. It is said that law firms and lawyers will benefit from the increase in international dispute resolution activity in Singapore. What is your reaction to this? Opening the door to third-party funding is likely to benefit law firms and lawyers in Singapore, according to Barker. “Third-party funding is already permitted in the United Kingdom and the United States, and being considered in Hong Kong. Singapore law firms which have alliances with foreign law firms in these jurisdictions will be able to tap into the experience acquired by colleagues and overseas offices in relation to third-party funding arrangements.” Chin agrees: “That this would be a boon to the legal industry cannot be overstated. Cases which may not otherwise see the light of day can now have a real chance of being heard. That such cases are typically for fairly significant claims underscores the impact that funding can have.” For Quah, however, the development will be a challenge Singapore’s local firms will have to rise up to: “Whilst an increase in international dispute resolution activity in Singapore will certainly enlarge the overall pie, domestic law firms will stand to benefit only if they are perceived to be able to fight a case on an equal footing with the large Western offshore firms.” The Ministry of Law says, “Singapore has excelled in the area of arbitration and ranks among the world’s top seats for international arbitration, alongside London, Paris, Geneva, and Hong Kong.” How will the changes, if enacted, impact Singapore’s role in arbitration? The new legislation will make Singapore even more attractive as a seat for international arbitration, notes Barker, whilst allowing it to compete for a larger share of the growing volume of international arbitration cases. Singapore should go ahead with third-party funding for international commercial arbitration or lose parties that choose it for arbitration, says Quah. “If Singapore does not, parties relying on third-party funding may shy away from using Singapore as the seat of arbitration, as funders do not want to be exposed to the risks of not being able to enforce funding agreements.” “The liberalisation demonstrates that Singapore is open to new and novel ideas and willing to introduce and embrace what is progressive to keep up with an evolving business landscape,” says Chin. “Such dynamism is key to what makes a successful dispute resolution hub in the international arena.” Further, Chin notes: “This is not about Singapore alone: strengthening Singapore’s position increases the attractiveness of doing business in this region.”
December 14, 2016

RHTLaw Taylor Wessing Head of Private Wealth Tan Choon Leng featured in Singapore Business Review

RHTLaw Taylor Wessing’s Head of Private Wealth Tan Choon Leng was quoted in an article published in Singapore Business Review titled “Slim pickings for private equity houses”. The article was first published in the December 2016-January 2017 edition of Singapore Business Review. Slim pickings for private equity houses PE houses face a scarcity of deals, but many remain hopeful given the high-growth trajectory of Southeast Asia and with international players setting up office in Singapore. Source: Singapore Business Review © 2016 Charlton Media Group Date: December 2016-January 2017 Edition When you ask private equity (PE) houses why they continue to flock to Singapore despite the dwindling number of deals in the country and in Southeast Asia, they will tell you that the short-term pain is worth the long-term gain. The region is primed for an upswing in PE activity in the coming decades as fast-growing markets become flush with investment opportunities, and a presence in the Singapore hub will ensure they can pounce on those lucrative deals. But, for now, PE firms are rolling with the punches and focussing on a few key plays, from privatisation of listed companies to technology acquisitions. “On a year-on-year basis there has been a marked slowdown both in terms of number of deals that get to completion as well as the number of new deals that PE houses are looking at,” says Tan Choon Leng, head of private wealth practice at RHTLaw Taylor Wessing LLP. “A near universal grouse that we hear from PE houses is the lack of appropriate targets and investee companies, especially in the healthcare and consumer sectors in Southeast Asia.” Tan reckons there has also been a perception of growing instability in the region, citing developments such as Thailand’s succession issue and Malaysia’s financial scandal involving 1MDB, which makes it trickier for PE houses to pick the right deals. There is a lot of “dry powder” in the industry – EY estimating around US$526.6b in September 2016 – but attractive deals providing healthy yields are harder to come by, says Bill Jamieson, partner, head, funds and financial services practice group at Colin Ng & Partners LLP. In fact, funds raised for Singapore had been increasing for years, notwithstanding a reverse in the first half of 2016, with many PE funds targetting Southeast Asia and using Singapore as a base for their business. “Despite the strong showing for funds raised, the challenge for many funds is finding the right investments in Singapore,” says Marcus Chow, partner at Bird & Bird ATMD LLP. “Funds are sitting on dry powder but the challenge is nonetheless in finding good internal rate of return (IRR) projects. Going private transactions and delistings from Singapore Exchange remain a growing trend for Singapore. We are acting on one such transaction now,” adds Chow. Privatisation picks up Singapore has seen a spurt of privatisation deals. This year, UOB Ventures backed the $269m privatisation of Eu Yan Sang, which specialises in traditional Chinese medicine. Other recent headliners include Northstar’s S$331m privatisation of Innovalues, and the Warburg Pincusbacked $1.78b privatisation of ARA Asset Management. “These are examples of classic PE plays on profitable but undervalued companies,” says Tan. “So long as the wider stock market remains relatively undervalued, it is likely that more such privatisation attempts will follow.” An increasing number of listed companies in Singapore are warming up to the idea of delisting due to taxing requirements and lower valuations, says Evelyn Ang, senior partner at Dentons Rodyk & Davidson LLP. “Singapore listed companies are subject to public scrutiny and are required to comply with numerous listing requirements including rules on public disclosure of material information, requirements for shareholders’ approvals for certain types of transactions and obligations to provide quarterly or half yearly reports to investors,” she says. “Combined with thin trading volumes and depressed valuations of companies listed on the Singapore Exchange (SGX), the option of delisting would and does appeal to founders and controlling shareholders.” Ang cites a Bloomberg estimate that around 13 companies with a combined market value of $4.5b have announced their plans to delist from the SGX in the first half of 2016. This year alone, OSIM International, Eu Yang Sang International, Goodwood Park Hotel Limited, SMRT Corporation and Tiger Airways Holdings Limited delisted from the SGX. Foreign buyers looking to establish a foothold in Asia have led the interest in Singapore listed companies, says Ang. In November 2016, Dutch coffee and tea firm Jacobs Douwe Egberts (JDE) made a cash offer for all shares of Super Group Ltd, which owns the popular Owl brand of coffee, for approximately $1.45b. Ang reckons the acquisition will extend the coffee and tea business of the European billionaire’s Reimann family into Asia. If the foray proves successful, she expects JDE to delist and privatise Super Group Ltd. Southeast Asia’s golden promise Aside from privatisation plays, PE houses in Singapore are also preparing for the shower of opportunities as Southeast Asian economies strengthen further. “This market is definitely receiving greater PE attention than it has in the past and is likely to keep PE houses very busy for the foreseeable future,” says Tan about the Philippines, citing Baring Asia PE’s US$137m investment in Telus International. The Philippine economy expanded at its quickest pace in three years, growing at 7.1% in the third quarter of 2016, making it one of the fastest growing economies in Asia. Tan reckons there are a lot of reasons for optimism in the Southeast Asian PE and mergers and acquisitions industry. Not only are the US elections and its destabilising effects over, but the Southeast Asian market will look relatively more attractive than Europe, which will face continued uncertainty and relatively low growth rates. Other than the Philippines, Indonesia is also attracting PE attention after the completion of its tax amnesty in the first quarter of 2017 and the increase in the number of sectors open to foreign investment. In addition, Jamieson says, “Singapore is the PE hub of Southeast Asia and a hub for PE firms looking to invest into India. Hence, when we discuss private equity in Singapore we must necessarily discuss the investment opportunities in the region.” He also points out that privatisation of state-owned entities in countries such as Vietnam presents “once-in-a-lifetime opportunities” for PE players to invest in. PwC predicts that seven of the world’s 12 biggest economies in 2030 will come from emerging markets, which is why PE houses are ramping up their presence in Singapore. “We are seeing a more active private equity market with more international PE players setting up office in Singapore over the recent years,” says Ling Tok Hong, private equity leader at PwC Singapore. “This demonstrates the keen interest of PE in Singapore and the region, in line with a megatrend – we are seeing a shift in global economic power from west to east as well as the growing middle class population in the region.” Ling notes that with a crush of PE interest in the region and the limited number of deals available, competition is becoming fierce and forcing PE managers to differentiate themselves by demonstrating their ability and track record in creating value. Key sectors Given the increased spending power of the growing middle class in the region, analysts identified key sectors driving activity in PE. These are infrastructure, healthcare, retail and e-commerce, financial technology (fintech), and food & beverage (F&B). The larger ticket transactions were in the traditional engineering, manufacturing, F&B, and logistics industries, including large ticket real property plays, notably in the acquisition of Asia Square Tower 1 by Qatar Investment Authority from Blackrock, says Sheela Moorthy, partner in the Singapore office of Norton Rose Fulbright. F&B businesses continue to receive interest among PE firms, notes Doris Yee, director at Singapore Venture Capital & Private Equity Association, as shown in Standard Chartered Private Equity’s investment into Phoon Huat, a family-owned business and leader in the baking ingredients sector. Similarly, PAG’s investment into Paradise Group, a homegrown restaurant chain with restaurants across Southeast Asia, is expected to help it expand into China. “This is perhaps a reflection of Singapore’s own foodie culture with very high expectations on quality which in turn pushes up the standards of food-related businesses in Singapore,” says Yee. Jamieson adds that there has been a trend towards picking undervalued F&B companies with potential for regional growth such as Viz Branz, F&N, and Super Group. A notable transaction was the investment by Hera Capital and DSG Consumer Partners into Salad Stop!, a local F&B chain with fast-growing regional franchises, and there will likely be more F&B transactions in the local market based on current valuations. Southeast Asia’s burgeoning and increasingly tech-savvy consumer market is also fuelling investments into the e-commerce and fintech sectors. Regional e-commerce retailer Lazada received a US$500m investment from Alibaba, which also bought additional stakes worth the same amount from early investors, including Rocket Internet. On the technology front, meanwhile, there was buzz around the acquisition of Singapore-headquartered and micro-optics and optical sensing leader Heptagon by Austria’s global sensor manufacturer AMS. Valued at approximately US$570m, with a potential earn-out of up to US$285m based on certain 2017 targets, the investment attracted the likes of Vertex, Granite Global Ventures, Credence, and Nokia Growth Partners. “Our clients have been investing private equity into fintech,” says Jamieson. “The support from the government for the development of this sector will encourage more financial investors into this space through Singapore.” There are excellent opportunities as well in the troubled offshore marine sector. “Companies under distress would present some opportunities for PE firms with the right expertise and appetite to pick up some acquisitions at attractive valuations,” says Jamieson.
December 5, 2016

RHTLaw Taylor Wessing Partner Eugene Quah quoted in The Sunday Times

RHTLaw Taylor Wessing’s Litigation & Dispute Resolution Partner Eugene Quah was quoted in The Sunday Times article titled “How to fight back against the scourge of fake news”. The article was first published in The Sunday Times on 4 December 2016. How to fight back against the scourge of fake news Source: The Sunday Times © Singapore Press Holdings Ltd. Date: 4 Dec 2016 Author: Rachel Au-Yong From statutory provisions to greater checks by online media itself and by individuals, there are several avenues to halt the flow of phony stories. It could be a social media story that spreads falsehoods about an individual. Or it could be an amateur's prank that causes national consternation, as with a teenager's made-up story in March last year prematurely reporting that former prime minister Lee Kuan Yew had died. Whether you are an outraged individual or the Government, you will want to halt the spread of that fake news. While it is not a direct offence to write or distribute fake news, there is legislation one can tap to hold someone accountable. Take the Telecommunications Act. Under it, people who transmit a message known to be false or fabricated can be fined up to $10,000, jailed for three years, or given both punishments. The penalties are higher if it is a bomb hoax. In 2007, a polytechnic student was sentenced to three months' jail and a $4,000 fine after he posted a bogus article on a forum saying that bombs had been found at the Toa Payoh bus interchange. It was put up a day after the July 7, 2005, London bombings. However, there are practical difficulties to enforcing this, says RHTLaw Taylor Wessing partner Eugene Quah. These include finding out the identities of people who post news anonymously, and establishing that they actually had knowledge that the news posted was false or fabricated. In the case of the polytechnic student, the police took almost a year to find him, partly because he had tapped his neighbour's Internet connection to make the posting, masking his true identity. As for those who threaten to disrupt social harmony, there are several statutory options. For example, under the Penal Code and Sedition Act, it is an offence to promote feelings of ill will between different races or classes. At least eight people have been charged with sedition since 2005, but only in the most recent case - involving the founders of sociopolitical website The Real Singapore - were made-up articles involved. The Maintenance of Religious Harmony Act also allows the Home Affairs Minister to issue a restraining order against any religious leader inciting enmity between different religious groups, or a person who encourages a religious leader or group to do so. So far, no such restraining order has been issued. Individuals or organisations believing their reputation has been damaged by fake news can turn to defamation laws. There can be damage without there being a clear victim of defamation - a false rumour about an impending outbreak of war causing investors to panic and sell investments, for example. "In such situations, it is arguable whether the victims can rely on the tort (a civil wrong) of negligent misstatement causing economic loss to claim damages, as the test may not be easy to satisfy," says Mr Quah. Victims can also seek legal recourse via the Protection from Harassment Act. "The bar for this is lower, as it doesn't have to be defamatory, just false," says lawyer Vikram Nair, an MP for Sembawang GRC. All Internet content providers are automatically licensed under the Class Licensing Scheme by the Infocomm Media Development Authority (IMDA), which subjects the providers to a code of practice. While the code does not directly address fake news as a category, if a content provider breaches the code by, say, sowing racial discord or threatening national security in an article, the IMDA can cancel the class licence. It can also block overseas sites that are not class-licensed. But other agencies with more teeth might have already stepped in. The police, for example, can arrest someone who posts a bomb hoax. The mainstream media is also regulated, with most Acts coming under the purview of the Ministry of Communications and Information. But, Mr Nair says, the biggest check on traditional media is its professional integrity. "I'm less concerned about the established papers, because in this age, just about anyone can spread news and they are much harder to track down." PROBLEMS WITH MAKING IT ILLEGAL There are good reasons not to put in place laws to criminalise fake news, Mr Quah says. First, this could inadvertently clamp down on journalists, who might "second-guess themselves", especially while reporting preliminary information on rapidly developing situations. Second, it is difficult in some cases to distinguish between facts and opinions, he adds. A third reason is that it is human nature to tell stories, which may get embellished in the retelling. "Enacting laws to criminalise fake news would then expose a wide class of persons to potential prosecution." Fourth, criminalising fake news means we would lose satire, humour and artistic expression, too. It could also appear to be censorship, "which always leaves a bad taste", says PRecious Communications managing director Lars Voedisch. PUSHING BACK But other ways to address the issue of fake news are emerging. Already, four undergraduates from three American colleges have created a false news detector in the form of a Chrome browser extension during a college hackathon. It is available for the public to download to try. In Singapore, new local start-up JobTech posted an open letter directed at Facebook, offering to "jointly counteract misinformation". Its technology has already successfully helped to filter out duplicate and bogus job applications. And Facebook and fellow social media giant Google have promised to cut fake news sites from their advertisement programmes - a move that will most likely stifle those who churn out phony stories for the lucrative revenue. Facebook chief executive Mark Zuckerberg has said he is working to improve the technological ability to classify misinformation, put out labels on stories that have been flagged as false, and make it easier for people to report fake news, among other things. Indeed, just last Friday, stories began to appear on Facebook feeds with a survey attached, asking: "To what extent do you think this link's title uses misleading language?" Readers were given five options to tick - "not at all", "slightly", "somewhat", "very much" and "completely". But some are calling for Google and Facebook to be held to the same standards as an established traditional media company. German Justice Minister Heiko Maas has suggested that Facebook ought to be held criminally liable for failing to remove hate speech. In Singapore, in 2012, the Government took the step of setting up a website called Factually to clarify misperceptions about its policies or incorrect public assertions on government matters potentially harmful to Singapore's social fabric. It has tackled rumours and clarified policies related to the haze and the economy and, most recently, to address a sociopolitical website's article that had fabricated and attributed racially charged statements to Home Affairs and Law Minister K. Shanmugam. The Government also set up the Media Literacy Council in 2012 to help citizens navigate digital information. The council has been running an annual campaign to encourage citizens to be discerning about what they encounter online, and it works with partners such as Facebook, Google and the National Library Board to help people distinguish fake items from real information. Individuals can also do their bit. "Communities should step up and correct falsehoods about the community," says Institute of Policy Studies senior research fellow Carol Soon. Mr Zaqy Mohamad, an MP for Chua Chu Kang GRC and who chairs the Government Parliamentary Committee for Communications and Information, believes that grassroots groups still play an important role in addressing untruths, many of which are still spread by word of mouth or via text messages. These are harder to address than on a public platform such as a blog or on Facebook. Mr Zaqy says he has come across several taxi drivers who complain that they have heard that Uber or Grab drivers are mostly foreigners who are stealing their jobs. "But this is obviously untrue - you have to be Singaporean or a permanent resident to be such a driver," he says, emphasising the need for community leaders to keep an ear out for such rumours and familiarise themselves with the facts. But it is individuals who have a key role to play too, observers say. "If you think something is wrong, just Google it (to check it) - it works most of the time," says PRecious Communications' Mr Voedisch. Dr Soon says users can play an active role by calling out dubious sites. "Automated searches for fake news require machine learning, which in turn depends on human input," she says. Nanyang Technological University communications professor Ang Peng Hwa advises people to balance their online newsfeed with a diversity of viewpoints. The last word goes to Media Literacy Council chairman Lock Wai Han, who declares: "To stem fake news or misinformation, a combination of public education and corporate responsibility is necessary." "However, the responsibility for distinguishing fact from fiction ultimately rests with the individual."