August 2, 2017

Head of Regulatory Practice Nizam Ismail shares with The Straits Times his take on initial coin offerings (ICOs) becoming a popular method to fund raise

RHTLaw Taylor Wessing Head of Regulatory Practice Nizam Ismail shares with The Straits Times his take on initial coin offerings (ICOs) that is becoming a popular method of fund raising.  The article was first published in The Straits Times on 2 August 2017.  Scheme's real value lies in the long-term benefits Source: The Straits Times © Singapore Press Holdings Ltd Date: 2 August 2017 Author: Grace Leong The issuing of digital tokens such as virtual coins will face regulation here if they are structured like securities coming under the Securities and Futures Act (SFA), the Monetary Authority of Singapore (MAS) said yesterday. The clarification comes in the wake of a rise in initial coin offerings (ICOs) here as a means of fund raising. The US Securities and Exchange Commission last week also issued a report that virtual coins or tokens may be securities - subject to the federal securities laws. ICOs are prone to money laundering and terrorism financing risks, given the anonymity of transactions and the ease of quickly raising large sums, MAS said. Some digital tokens can confer on holders certain rights such as services, non-monetary rewards and physical assets such as gold. A virtual currency is a type of digital token, which typically functions as a medium of exchange, a unit of account or a store of value. Previously, MAS had said that while virtual currencies per se were not regulated, the offerors of such currencies would be regulated in relation to money laundering and terrorism financing risks. But now, MAS has said offers of digital tokens will be regulated if they are structured like securities, debt, or units in a collective investment scheme under SFA. MAS' position of not regulating virtual currencies is similar to that of most jurisdictions. But it noted the function of digital tokens has evolved. For example, digital tokens may represent ownership or a security interest over an issuer's assets or property. Issuers of such tokens would be required to register a prospectus with MAS prior to the offering of such tokens, unless exempted. They would also be subject to licensing requirements under the SFA and Financial Advisers Act, unless exempted, and to the applicable requirements on anti-money laundering and countering terrorism financing. Platforms offering secondary trading of such tokens have to be MAS-approved as a recognised market operator under SFA. The regulator is also assessing how to regulate money laundering and terrorism financing risks associated with activities involving digital tokens that do not function solely as virtual currencies. Angel investor David Lee said this is "positive because MAS has issued clear statements on what constitutes a token offering. The key thing is the token must not be backed or linked to an underlying security or debt''. He added: "If you try to do a Reit through an offer of tokens, then that is a security offering. If you are offering rights like a right to vote, or using certain facilities in a software, then that is not regulated by MAS. There are a lot of token offerings in that category." Mr Nizam Ismail, partner and head of regulatory practice of RHTLaw Taylor Wessing, said ICOs are a "cost-efficient way to raise funds". "But the issuer will have to get independent legal advice on whether their coins or tokens are securities, because the offer of securities without a prospectus where required is a criminal offence." He warned: "The moment there is a fraudulent offer, that will affect investor confidence, and kill the entire market."
July 31, 2017

RHTLaw Taylor Wessing bolsters Corporate Practice with new Partner appointment

New hire with specialist knowledge underscores Firm’s emphasis on leveraging the demand for legal advice on cross border transactions with both Chinese and Asian clients Leading international law firm RHTLaw Taylor Wessing strengthens its Corporate Practice with the appointment of Mr Wee Jee Kin as a Partner, effective 4 July 2017. Jee Kin joins RHTLaw Taylor Wessing from a China-based oil and gas / infrastructure conglomerate where he served as Group Head of Legal overseeing a team comprising lawyers from China, France and Singapore. Prior to his five-year stint in the China-based company, he was Head of Group Legal & Company Secretary of public-listed company, Hanwell Holdings Limited. With a legal career spanning 25 years, Jee Kin has substantial merger and acquisition (M&A) experience in the international arena, and also has significant expertise in commodities, healthcare, petroleum products, technology and telecommunications. Many transactions he has handled were cross-border with geographical coverage in Asia, United States, Europe, Middle East and Africa. He is also experienced in corporate governance and the Singapore Exchange (SGX) Listing rules. Azman Jaafar, Head of RHTLaw Taylor Wessing’s Corporate Practice and also its Deputy Managing Partner, added, “Jee Kin’s addition to the Corporate Practice is in line with our strategy of diving deeper into Greater China. Not only does he have fundamental credentials in the region, he brings with him the added perspectives of how business owners operate having headed various in-house legal teams. I look forward to working with Jee Kin as we continue to expand our presence in Asia.  With his unique skill sets, Jee Kin will be an important asset for our ASEAN Plus M&A team as demand for legal services in cross-border transactions grow this year.” Jee Kin has a broad range of experience in investment and development projects in China. He has acted as a point of liaison for Chinese subcontractors including State Owned Enterprises on infrastructure contracts for Africa, and led negotiations on property and commercial acquisitions in China. He has also been a Director of a China-based company, ASA Holdings Ltd since 2011. Jee Kin’s arrival follows the appointment of Ben Constance and Gilad Shay, who joined the Firm’s Corporate practice in February 2017. Jee Kin graduated from University of Hull in the United Kingdom in 1989. He was called to the Bar of England and Wales and the Bar in Singapore in 1991. In 2003, he obtained his LL.M in Information Technology and Telecommunications Law from the University of Strathclyde, Glasgow in the United Kingdom and was called to the Bar in Queensland, Australia in 2004. --- This press release is featured in the following news reports: "RHTLaw plucks corporate partner from oil and energy MNC" - Asian Legal Business, 1 August 2017 "Corporate Move" - The Edge, 14 August 2017
July 28, 2017

Intellectual Property & Technology Partner Jack Ow quoted in TODAY on how the “standard of harm” could be interpreted differently with reference to the recent changes to the Personal Data Protection Act

RHTLaw Taylor Wessing's Intellectual Property & Technology Partner Jack Ow was quoted in TODAY on how the “standard of harm” could be interpreted differently with reference to the recent changes to the Personal Data Protection Act (PDPA).   This article was first published in TODAY on 28 July 2017. Informing customers of breaches among proposed PDPA changes Source: TODAY © Mediacorp Press Ltd. Date: 28 July 2017 Author: Tan Weizhen SINGAPORE — Under a slew of proposed changes to the Personal Data Protection Act (PDPA), companies would have to notify customers as soon as possible if their data — such as NRIC numbers, credit card information or passwords — had been compromised. Businesses would have to inform the Personal Data Protection Commission (PDPC) within 72 hours if they were hit by significant data breaches — when personal data of 500 or more consumers has been compromised. In the first major review of the Act, which came into effect in 2014, they could also be allowed to use consumers’ personal data without getting their consent in certain cases. This and other proposals were put up for public consultation on Thursday (July 27). The PDPA currently requires an individual’s consent if an organisation wants to collect their personal data. Announcing the review at the Personal Data Protection Seminar on Thursday, Minister for Communications and Information Yaacob Ibrahim said the PDPA was crafted in an era when “the majority of data was provided by users who fill in their personal particulars via physical and online forms”.  “Today, data can be generated and mined through online activities and transactions,” he told the seminar at Sands Expo and Convention Centre. Under the proposals, if companies wish to use customer data for legal or business purposes in situations where it is not appropriate to get their consent, they can do so provided it will be of “larger benefit to the public”. For example, bicycle-sharing services may want to share, among themselves, data of customers with a track record of misusing or damaging bikes. In cases when it is impractical to get consent, firms could use customer data provided it caused no “harm” to them, such as leading to calls or spam.  For example, a developer of web-connected devices, like a smartwatch, may want to analyse users’ data to improve its services, but might not be able to get consent through the smartwatch interface. Under the proposals, it would be allowed to do so as long as it did not harm the consumers. The proposed rules would just require the businesses to notify customers in any manner of their choosing, such as via their websites. Mr Bryan Tan, of law firm Pinsent Masons, said the proposals offer “a more graduated approach”, adding: “It is a more refined way of giving businesses more options.” On whether the criteria that businesses would have to meet before doing away with customers’ consent are sufficiently watertight, Mr Tan said the onus would lie on businesses to make that judgment — for example, whether customers would suffer harm as a result. However, Mr Jack Ow, intellectual property & technology partner at RHTLaw Taylor Wessing, believes that “harm” may be interpreted differently by different organisations: “It remains open as to how the standard of harm should be assessed, and if objectively assessed, on whose or what standards, principles and/or morality.” The proposals are up for public consultation until Sept 21. The PDPC hopes to implement them by 2019.
July 28, 2017

Banking & Finance Partner Gerard Ng shares with The Business Times the uncertainty of applicability of Singapore law to virtual currency or related technology, in response to “proptech” companies using blockchain platforms to “tokenise” property

RHTLaw Taylor Wessing's Banking & Finance Partner Gerard Ng shared with The Business Times on the uncertainty of applicability of Singapore law to virtual currency or related technology, in response to “proptech” companies using blockchain platforms to “tokenise” property. This article was first published in The Business Times on 28 July 2017. Singapore firms dip toes into blockchain tech for property Source: The Business Times © Singapore Press Holdings Ltd. Date: 28 July 2017 Author: Lee Mexian AT LEAST two Singapore "proptech" companies are using blockchain platforms to "tokenise" property - that is, to create tokens backed by real estate which investors can buy. It is a pioneering move that is nascent even globally - and is such a new idea that there does not seem to be explicit existing legislation in Singapore governing these digital instruments. The two companies are FundPlaces and Reidao. Three weeks ago, FundPlaces went ahead and launched its real estate-backed cryptocurrency called Tiles. Investors are issued these digital tokens in exchange for Singapore dollars, with each token being entitled to the cashflow of the underlying real estate investment which it references. (Most of FundPlaces' projects for which it is raising funds are in Australia and the UK.) A blockchain is basically a way to maintain a database without a central authority. It makes it feasible to have a fully distributed database in which users always have the most updated version of the database. FundPlaces' co-founder and chief executive Brian Wee named three advantages of using blockchain: It makes it transparent for investors, as every transaction is recorded and visible on the chain; It reduces the cost of investment, since there are no asset managers involved; and It improves the liquidity of real estate, because the capital outlay for buying a token is much smaller than that for an entire property. The response has been encouraging so far, he added. Within two weeks of launch, FundPlaces raised £200,000 (S$355,808) for the co-financing of a UK residential development project. It also raised about A$30,000 (S$32,534) out of a targeted A$500,000 for another residential development project in Perth. Both projects are targeted to offer returns of 15 per cent or higher. Asked for its stance on such instruments, the Monetary Authority of Singapore (MAS) cautioned caveat emptor ("Buyer, beware"), citing the potential abuse of such platforms for criminal activity. Its spokeswoman said: "The anonymity afforded by such new technologies and products, as well as the potentially wider reach at faster speeds, could certainly allow criminals to abuse them to cloak their illicit activities and gains. "Whether the offer and exchange of digital tokens on blockchain-enabled platforms constitute an activity to be regulated by the MAS depends on the facts of the case. MAS is closely watching this space." The regulator added that platforms and products that fall within the Securities and Futures Act (SFA) and Financial Advisers Act (FAA) will have to be regulated, and be subject to obligations to counter money laundering and the financing of terrorism. This will apply no matter where their investors are based - a pertinent point, given that online blockchain platforms essentially open the floodgates for investors from across the world to take part in deals. Gerard Ng, a partner in the banking and finance practice at RHTLaw Taylor Wessing, had helped FundPlaces draft its documentation and structure its transactions. He described the job as "novel" but "not easy". He said he had to start with the most basic of definitions, for instance by answering the question of whether the digital token, Tile, is considered to be a security, which would subject it to the SFA. He decided that it was not, because it was neither a debt nor equity instrument. Because FundPlaces does not dispense advice on corporate finance, he concluded that this would exempt it from the need to apply for a licence to operate, as required under the FAA. He said: "Our laws were not designed with virtual currency or related technology in mind. Businesses that offer products and services using innovative technology have to deal with issues surrounding the uncertainty of the applicability of certain laws to such products and services." In this regard, the US appears to be a step ahead. The Securities and Exchange Commission this week said companies that raise money through the sale of digital assets must adhere to federal securities laws and must register the deals with the government, as should exchanges that offer trading of cryptocurrencies such as bitcoin and ether. Mg Ng said: "Existing legal regimes are still applicable and relevant, and must be looked at in detail. Structuring the transaction involved lateral thinking and copious research to understand the technology, the products and business model." He also referred to existing laws such as contract law to develop a set of rules to govern the legal relationship between his client, FundPlaces, and its investors; he also had to consider laws governing real estate in the jurisdictions in which the properties are located. Meanwhile, Reidao is beating its own path. Its co-founder and chief executive Darvin Kurniawan said that its blockchain platform is still at the proof-of-concept stage; it is planning to test it by acquiring three properties in Malaysia next month and allowing the community to subscribe to them. Unlike FundPlaces, which uses its own private blockchain platform - meaning that only its members have access to it and only the operator can add blocks to the chain - Reidao uses the public Ethereum blockchain. It also uses the gold-backed token called DGX, which is more stable than the volatile Bitcoin and Ether. How the process works: When the full amount for a property has been raised in tokens, Reidao liquidates this amount to buy the property in the local fiat currency. At distribution time, cash is converted back to gold and then to DGX, which is paid out to token holders. Mr Kurniawan said his company had contacted MAS when it started working on the idea, but the central bank did not "make any real comments" due to the lack of legislation to instruct the process. Reidao is now just observing the relevant rules, such as laws on trust entities, into which it plans to place its properties. Both FundPlaces and Reidao recognise the risk that "dirty" money can be laundered through their platforms. To overcome this, they have put in place know-your-customer (KYC) and due-diligence processes at the pre-registration phase. FundPlaces' Mr Wee said, for example, that his outfit requires its Singapore investors to have a local bank account, so the banks (and their own KYC processes) act as a "first shield". FundPlaces plans to expand to Australia, China or India. Mr Wee said: "It is probably a little less risky now, because we are dealing mainly in Singapore and funds come in from people with Singapore bank accounts. But once we start going overseas, there will be much higher risks." Mr Ng from RHTLaw added that no platform operator can guarantee that its platform is not being used to launder money: "Despite the negativity associated with payment using virtual currency due to the use of Bitcoin as payment for illicit goods and to launder money, the fact remains that virtual currency can be an ideal and a legitimate means of payment for goods and services," he said.