SCI M9 – Life Insurance And Investment-Linked Policies Set Two

Correct: Under Section 286 of the Securities and Futures Act (SFA), for a Singapore-constituted collective investment scheme (CIS) to be authorized for offer to the retail public, MAS must be satisfied that the manager is fit and proper, the trustee is approved under Section 289 of the SFA, and the scheme’s structure and investment guidelines adhere to the Code on Collective Investment Schemes (CIS Code).

Incorrect: Recognition under Section 287 applies to foreign-constituted schemes, not those constituted in Singapore. Registration of the prospectus is a mandatory step for retail offers, not just lodging. The Singapore Exchange (SGX) is not the authorizing body for CIS; that role belongs to MAS. While a Capital Markets Services (CMS) license is required for the manager, authorization is not automatic, and the trustee must be specifically approved under the SFA rather than being any licensed commercial bank.

Takeaway: Authorization under Section 286 requires a fit and proper manager, an approved trustee, and strict adherence to the CIS Code for Singapore-constituted retail schemes.

Correct: In Singapore, for Collective Investment Schemes (CIS), the register of unitholders maintained by the registrar is the authoritative record of ownership. Under the trust deed and the regulatory framework, the register provides prima facie evidence of the legal title of the persons named therein to the units. This means that the person whose name is on the register is legally recognized as the owner unless proven otherwise.

Incorrect: The suggestion that the register is a secondary tool to physical certificates is incorrect because modern CIS in Singapore are typically uncertificated, and the electronic register is the primary record of title. While the registrar must maintain records, there is no requirement under the Code on CIS to file the full register with the MAS on a weekly basis for surveillance. While the register helps in identifying who should receive distributions, it is not a direct tax assessment tool for the automatic deduction of withholding tax by IRAS; tax obligations depend on the specific status of the unitholder and the nature of the distribution.

Takeaway: The register of unitholders is the definitive legal record of ownership for a Collective Investment Scheme in Singapore, providing prima facie evidence of title.

Correct: According to the Variable Capital Companies Act in Singapore, a VCC is required to lodge a notice with the Registrar (ACRA) of any change in the appointment of a director, secretary, or auditor within 14 days from the date of the change. This ensures that the official records maintained by ACRA are kept up to date for regulatory and oversight purposes.

Incorrect: The 30-day timeframe is incorrect as the VCC Act specifically mandates a 14-day window for such filings. Waiting until the Annual Return is a violation of the requirement for timely notification of changes to the company’s officers. While MAS is the lead regulator for the conduct of VCCs, statutory filings related to the corporate structure and officers must be lodged directly with ACRA, not MAS, and there is no automatic update mechanism between the two for these specific corporate secretarial changes.

Takeaway: VCCs must notify ACRA of any changes to their directors, secretaries, or auditors within 14 days to comply with the Variable Capital Companies Act.

Correct: In accordance with the MAS Guidelines on Licensing, Registration and Conduct of Business for Fund Management Companies, managers must ensure fair and equitable treatment of all clients. A pre-determined, written allocation policy—typically using a pro-rata methodology for partial fills—is essential to prevent ‘cherry-picking’ and to ensure transparency. This ensures that no single fund is unfairly advantaged or disadvantaged during the execution of bulk trades.

Incorrect: Allocating trades post-execution based on performance (option b) is considered a form of cherry-picking and violates the principle of fair treatment. Prioritizing funds based on fee structures (option c) constitutes a significant conflict of interest and breaches the manager’s fiduciary duty to act in the best interests of all investors. Using historical volatility as a priority metric (option d) is an arbitrary method that does not satisfy the requirement for a transparent and equitable allocation process for aggregated orders.

Takeaway: Fund managers in Singapore must utilize pre-determined and objective trade allocation policies, such as pro-rata distribution, to ensure all collective investment schemes are treated fairly and to mitigate conflicts of interest.

Correct: In Singapore, the removal of a manager by a trustee is governed by the Securities and Futures Act (SFA) and the specific provisions within the trust deed. If a manager fails to perform its duties or breaches the trust deed, the trustee has the authority (and duty) to remove them. To maintain the scheme’s authorized status, the trustee must ensure a successor manager is appointed who meets the MAS eligibility criteria and receives the necessary regulatory approval.

Incorrect: Suspending redemptions and waiting for an ordinary resolution is incorrect because the trustee often has the power to act independently in the interest of unitholders, and significant changes typically require an extraordinary resolution rather than an ordinary one. A manager cannot unilaterally appoint a successor without trustee and MAS oversight, as this would bypass critical regulatory safeguards. Reporting to the SGX for delisting is not the standard procedure for replacing a manager of an authorized CIS and would likely cause unnecessary harm to unitholder liquidity.

Takeaway: The removal of a CIS manager in Singapore requires the trustee to act in accordance with the SFA and the trust deed, ensuring regulatory approval of a successor to protect unitholder interests.

Correct: Under Section 48 of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA), it is an offense to disclose to any other person information which is likely to prejudice an investigation or a proposed investigation. By informing the fund manager that their subscription was being flagged for a money laundering investigation, the junior auditor has committed ‘tipping off’. As the MLRO, Noah must ensure that the suspicious activity and the tipping-off incident are reported to the Suspicious Transaction Reporting Office (STRO) of the Commercial Affairs Department.

Incorrect: Option b is incorrect because while data privacy is important, the CDSA is the specific legislation governing the disclosure of money laundering investigations, which takes precedence in criminal matters. Option c is incorrect because the CDSA does not provide a ‘professional audit’ exemption for tipping off; disclosing an investigation to the subject is a criminal offense regardless of the lack of corrupt intent if it prejudices the investigation. Option d is incorrect because while MAS Notices provide regulatory guidance on AML/CFT controls, the CDSA is the primary statute that defines the criminal offense of tipping off and the reporting obligations to the STRO.

Takeaway: Under the CDSA, tipping off is a criminal offense that occurs when information about a suspicious transaction report or investigation is disclosed to the subject, potentially prejudicing the investigation.

Correct: According to the MAS Code on Collective Investment Schemes (Appendix 2 on Money Market Funds), a manager must have an internal credit assessment process that is independent and robust. The manager cannot rely solely or mechanically on external credit ratings. The assessment must consider a range of factors, including the issuer’s financial condition, the specific characteristics of the instrument, and broader market and macro-economic conditions to ensure the assets are of high credit quality.

Incorrect: Relying mechanically on external ratings is discouraged by MAS to prevent ‘cliff effects’ and ensure managers exercise their own fiduciary judgment. Delegating the core investment responsibility of credit assessment to a trustee or custodian is inappropriate as the manager is responsible for the fund’s investment decisions. Using market-implied spreads or yields as the primary indicator is insufficient because market prices can be volatile and influenced by liquidity factors rather than pure credit fundamentals.

Takeaway: Managers of Singapore Money Market Funds must perform their own independent, multi-factor internal credit assessments and avoid over-reliance on external credit ratings.

Correct: In Singapore, FIDReC provides an independent and affordable avenue for resolving disputes between consumers and financial institutions. A complainant must refer the dispute to FIDReC within six months of receiving a final reply from the financial institution. The process involves mediation first, and if that fails, adjudication. An adjudicator’s award is final and binding on the financial institution if the complainant accepts it, but the complainant remains free to reject the award and pursue other legal avenues.

Incorrect: The requirement for a certificate of merit from MAS is incorrect as FIDReC is an independent body and does not require MAS intervention to start mediation. The claim limit for FIDReC is generally up to S$100,000 per claim, not a requirement for claims to exceed that amount. Furthermore, the FIDReC process does not permanently bar an investor from the court system; the investor only loses the right to sue if they choose to accept the binding adjudication award.

Takeaway: FIDReC offers a two-stage resolution process (mediation and adjudication) where the final award is binding on the financial institution only if the consumer chooses to accept it.

Correct: Under MAS guidelines and the Securities and Futures Act (SFA), the Product Highlights Sheet (PHS) is a mandatory, standalone document designed to provide a clear and concise summary of the key features and risks of a Collective Investment Scheme (CIS). It must follow a prescribed format, including specific headings and typically a page limit (such as 4 pages for standard funds), to facilitate easy comparison between different investment products by retail investors.

Incorrect: The PHS is intended to complement, not replace, the prospectus; investors must still be informed of the availability of the full prospectus. It is a regulatory disclosure document with a strictly prescribed format by MAS, not a customizable marketing tool for bank branding. Furthermore, the requirement for a PHS applies to all CIS offered to retail investors in Singapore, regardless of whether the fund is considered low-risk or high-risk.

Takeaway: The Product Highlights Sheet is a mandatory, standardized summary document designed to help retail investors understand and compare the key risks and features of a Collective Investment Scheme.

Correct: In accordance with the Code on Collective Investment Schemes issued by the Monetary Authority of Singapore (MAS), liquidity management tools such as redemption gates must be used in a way that ensures fair treatment of all unitholders. When a gate is activated, the standard best practice is to process redemptions on a pro-rata basis. This ensures that all investors who submitted a request for that dealing day are treated equally, rather than favoring those who submitted earlier in the day.

Incorrect: Processing requests on a first-come, first-served basis is considered inequitable in the context of a CIS. Suspending redemptions indefinitely is a much more severe measure than a gate and should only be used in exceptional circumstances where valuation is impossible, not simply because a gate threshold was met. Waiving the gate and using excessive leverage to meet redemptions can disadvantage remaining unitholders by burdening the fund with high costs and increased risk, which contradicts the manager’s duty to act in the best interests of all participants.

Takeaway: Redemption gates in Singapore-authorized funds must be applied equitably, typically through pro-rata allocation, to balance the liquidity needs of redeeming investors with the interests of those remaining in the fund.

Correct: According to Appendix 6 (Investment: Property Funds) of the Code on Collective Investment Schemes, the aggregate leverage of a property fund should not exceed 45% of its deposited property. However, the aggregate leverage may exceed 45% up to a maximum of 50% if the property fund has a minimum adjusted interest coverage ratio (ICR) of 2.0 times. This requirement ensures that the REIT maintains sufficient earnings to cover its interest obligations before taking on higher debt levels.

Incorrect: The requirement for a credit rating to exceed leverage limits was a previous regulatory framework that has been replaced by the interest coverage ratio (ICR) requirement. Seeking prior approval from MAS is not the standard regulatory process for exceeding the 45% limit, as the limit is self-executing based on the ICR threshold. While maintaining a balanced capital structure is a sound financial principle, there is no specific regulatory requirement for 25% equity funding specifically to trigger the higher leverage limit under the CIS Code.

Takeaway: In Singapore, a REIT’s aggregate leverage limit is 45%, which can be increased to 50% only if it maintains an adjusted interest coverage ratio of at least 2.0 times.

Correct: Under the Securities and Futures Act (SFA) and the Sixth Schedule, restricted schemes are offered only to ‘relevant persons’ (such as accredited or institutional investors). Because these schemes do not undergo the same rigorous authorization or recognition process as retail schemes, the law requires a mandatory disclosure stating that the scheme is not authorized or recognized by MAS and that units cannot be offered to the retail public. This ensures sophisticated investors understand the regulatory nature of the product.

Incorrect: Requiring a full registered prospectus is a hallmark of retail schemes, whereas restricted schemes operate under an exemption from prospectus requirements. MAS does not vet or approve the investment strategies or merits of restricted schemes, so any claim of such vetting would be a regulatory breach. The threshold for an individual to be considered a ‘relevant person’ based on transaction size alone is S$200,000, not S$100,000, and restricted schemes are never exempt from the mandatory disclosure regarding their non-authorized status.

Takeaway: Restricted schemes offered under the Sixth Schedule must explicitly disclose their non-authorized status to distinguish them from retail-regulated collective investment schemes.

Correct: In accordance with MAS Notice SFA04-N02 on the Prevention of Money Laundering and Countering the Financing of Terrorism, capital markets intermediaries in Singapore are required to conduct ongoing monitoring of their business relations. This involves a risk-based approach where the manager scrutinizes transactions to ensure they are consistent with the manager’s knowledge of the customer, their business and risk profile, and where appropriate, the source of funds. This ensures that any unusual patterns or suspicious activities are identified promptly.

Incorrect: The suggestion that monitoring is only required for specific AUM increases is incorrect because monitoring must be continuous and based on risk, not just specific growth triggers. The claim that monitoring is only for PEPs is false, as MAS regulations require ongoing monitoring for all business relations, though the intensity varies. The idea of a standardized, one-size-fits-all monitoring system contradicts the fundamental MAS requirement for a risk-based approach, which necessitates higher scrutiny for higher-risk customers.

Takeaway: Ongoing monitoring in the Singapore fund management industry must be risk-based, ensuring transactions align with the investor’s known profile and source of funds to detect potential money laundering or terrorism financing.

Correct: For a Variable Capital Company (VCC) to access Singapore’s network of DTAs, it must be considered a tax resident of Singapore. The Inland Revenue Authority of Singapore (IRAS) determines tax residency based on where the ‘control and management’ of the business is exercised. This is a factual test where the Board of Directors must exercise strategic decision-making within Singapore. While a VCC is a single legal entity, it is treated as a company for tax purposes, allowing it to apply for a Certificate of Residence (COR) to claim treaty benefits.

Incorrect: Registering sub-funds as separate legal entities is incorrect because under the VCC Act, sub-funds do not have a separate legal personality from the VCC itself. Applying for a blanket waiver from IRAS is not a valid regulatory procedure, as VCCs must satisfy specific residency and substance requirements to qualify for DTAs. Structuring a VCC as a flow-through partnership is incorrect because the Singapore tax framework specifically treats a VCC as a company (tax opaque) rather than a partnership (tax transparent) for income tax purposes.

Takeaway: To secure treaty benefits, a VCC must establish Singapore tax residency by ensuring its strategic control and management are localized in Singapore.

Correct: According to the Code on Collective Investment Schemes issued by the Monetary Authority of Singapore (MAS), the global exposure of a scheme to financial derivative instruments (FDIs) should not exceed 100% of its Net Asset Value (NAV). The Code allows managers to calculate this exposure using either the commitment approach, which converts derivatives into equivalent positions in the underlying assets, or the Value-at-Risk (VaR) approach, which measures the potential loss of the portfolio due to market risk.

Incorrect: The second option is incorrect because the underlying assets of any FDI used must be consistent with the investment objective and limits of the scheme; a fund cannot use derivatives to bypass restrictions on what it can hold directly. The third option is incorrect because counterparty limits for OTC derivatives (typically 5% or 10% of NAV depending on the counterparty) are regulatory requirements designed to limit credit risk and cannot be waived simply based on a high credit rating. The fourth option is incorrect because the VaR approach is not restricted to accredited investor funds; retail funds may use VaR if they have the appropriate risk management systems and it is more suitable for their strategy.

Takeaway: Singapore-authorized retail funds must limit global FDI exposure to 100% of NAV and may use either the commitment or VaR approach for risk monitoring.

Correct: Under MAS guidelines and the Code on Collective Investment Schemes, soft commissions are only permissible if the goods and services received are of demonstrable benefit to the participants of the scheme. This includes research and advisory services, such as specialized investment research and financial analysis software, which directly assist in the investment decision-making process. Furthermore, the manager must ensure that the execution of transactions is consistent with best execution standards and that the brokerage rates are not in excess of customary full-service rates.

Incorrect: The other options are prohibited because they do not provide a direct benefit to the fund’s participants. General office equipment and furniture (option b), travel, accommodation, and entertainment (option c), and office rental subsidies (option d) are considered ‘non-permitted’ soft commissions. These items benefit the fund management company’s own operational costs rather than the investors, creating a conflict of interest and violating the principle that soft commissions must be used for the benefit of the clients.

Takeaway: Soft commissions in Singapore are strictly limited to goods and services that provide demonstrable benefit to fund participants, such as investment research, while maintaining best execution standards.

Correct: According to the Code on Collective Investment Schemes issued by the Monetary Authority of Singapore (MAS), a manager may receive soft commissions only if the goods and services are of demonstrable benefit to the participants (such as research and advisory services). Furthermore, the manager must ensure that the execution of transactions is consistent with best execution standards and that the soft commission arrangements are clearly disclosed in the scheme’s prospectus and periodic reports.

Incorrect: Disclosing only in the annual report is insufficient because the CIS Code requires disclosure in the prospectus as well. Retaining cash rebates is prohibited; any cash rebates received by the manager for the account of a scheme must be credited to the property of that scheme. Soft commissions are generally restricted to investment-related services like research; general corporate administrative services, travel, and accommodation do not meet the ‘demonstrable benefit to participants’ criteria and are typically excluded.

Takeaway: In Singapore, soft commissions for a CIS are only permitted if they provide demonstrable benefits to participants and are transparently disclosed in both the prospectus and annual reports.

Correct: In Singapore, the Code on Collective Investment Schemes (Code on CIS) emphasizes the fair treatment of all participants. Forward pricing (dealing at the next calculated price) is the standard because historical pricing (dealing at the last known price) allows for ‘late trading’ or ‘market timing.’ If the market moves significantly after the last price was set, an investor using historical pricing could buy or sell at an outdated price to the detriment of existing unitholders, effectively diluting the fund’s value.

Incorrect: The suggestion that historical pricing is mandatory is incorrect as forward pricing is the industry norm and regulatory preference for retail CIS to ensure equity. There is no specific MAS requirement linking historical pricing to a 50% higher capital adequacy buffer. Furthermore, the requirement for forward pricing is not limited to illiquid assets; it is a fundamental principle applied across most retail funds to prevent arbitrage, regardless of the liquidity of the underlying assets like Singapore Government Securities.

Takeaway: Forward pricing is the primary method used in Singapore’s retail CIS industry to prevent market timing and ensure that transacting investors do not disadvantage long-term unitholders.

Correct: In the context of Singapore’s Collective Investment Schemes (CIS), the registrar is responsible for maintaining the register of unitholders. This register is of critical legal importance as it serves as the prima facie evidence of ownership. Under the trust deed and regulatory expectations, the registrar must ensure that the register is accurate and up-to-date, as it determines who is entitled to receive distributions, vote at meetings, and exercise rights associated with the units.

Incorrect: The suggestion that the register is a backup for the Trustee’s asset records is incorrect because the Trustee’s role is to hold the legal title to the fund’s assets, while the registrar tracks the ownership of the units in the fund itself. The idea that the register is primarily a marketing database is incorrect as its function is legal and regulatory, not promotional. Finally, the Monetary Authority of Singapore (MAS) does not calculate the daily NAV; this is the responsibility of the fund manager or the appointed fund administrator.

Takeaway: The registrar’s register is the definitive legal record of unitholder ownership in a Singapore-authorized Collective Investment Scheme.

Correct: According to Appendix 1 of the Code on Collective Investment Schemes (CIS Code) issued by the Monetary Authority of Singapore (MAS), while the limit for a single issuer is generally 10% of the NAV, the aggregate investment in entities within the same group must not exceed 20% of the scheme’s NAV. This group limit is designed to mitigate concentration risk associated with the financial health of a single corporate group.

Incorrect: The 10% limit is the standard restriction for a single issuer, not the aggregate group limit. A 25% limit does not represent the standard group limit for core funds under the CIS Code. There is no provision that allows group exposure to reach 50% based solely on the entities being listed on the Singapore Exchange (SGX); such a high concentration would violate the diversification principles intended by the MAS for retail collective investment schemes.

Takeaway: Under the MAS CIS Code, a core fund’s total exposure to entities belonging to the same corporate group is strictly capped at 20% of its Net Asset Value.

Correct: According to the Code on Collective Investment Schemes (CIS Code) issued by the Monetary Authority of Singapore (MAS), for index-tracking funds, the manager is required to disclose the actual tracking error in the fund’s annual report. This disclosure must include both the magnitude of the error and a clear explanation of the factors contributing to it, such as transaction costs, management fees, or the use of a representative sampling strategy instead of full replication.

Incorrect: The suggestion that disclosure is only required if a 3% threshold is exceeded is incorrect, as the CIS Code requires transparency on the actual tracking error regardless of a specific numerical trigger. Providing a three-year forecast of tracking error is not a mandatory requirement under the CIS Code, which focuses on historical performance disclosure. Confirming the use of synthetic derivatives to ensure zero variance is misleading, as tracking error is an inherent risk in index tracking and cannot be guaranteed to be zero, nor is the use of derivatives a mandatory disclosure for the purpose of explaining tracking error magnitude.

Takeaway: In Singapore, managers of index-tracking funds must disclose the actual tracking error and its causes in the annual report to ensure investors understand the fund’s effectiveness in replicating its benchmark.

Correct: According to the MAS Code on Collective Investment Schemes (CIS Code), specifically the investment guidelines for core investment schemes, a scheme may borrow only on a temporary basis for the purpose of meeting redemption requests or bridging requirements. The total borrowing must not exceed 10% of the scheme’s net asset value at the time the borrowing is incurred. This ensures the fund can manage short-term cash flow needs without fundamentally changing its risk profile through leverage.

Incorrect: The approach suggesting borrowing 25% for reinvestment is incorrect because borrowing for the purpose of leverage or enhancing returns is generally prohibited for standard authorized schemes. The approach suggesting unlimited borrowing from a trustee is incorrect as it ignores the 10% regulatory cap and the restriction on the purpose of the loan. The approach suggesting a total prohibition on borrowing is incorrect because the CIS Code explicitly allows for limited, temporary borrowing to facilitate operational liquidity and redemption management.

Takeaway: Under the MAS CIS Code, authorized schemes are restricted to temporary borrowing of no more than 10% of net asset value to manage liquidity needs like redemptions.

Correct: According to the Financial Advisers Act and MAS guidelines, a financial adviser can only use the term ‘independent’ if they operate without any influence or restrictions from product providers and do not receive any commission or other benefits that may create a conflict of interest. If any commissions or benefits are received from product providers, they must be fully rebated to the clients to maintain the ‘independent’ status.

Incorrect: Disclosing commissions is a standard requirement for all financial advisers under the FAA but does not grant the right to use the term ‘independent’. Maintaining a minimum number of product providers or having no ownership links with banks are insufficient on their own; the critical test for independence in Singapore is the absence of provider-imposed restrictions and the non-retention of commissions.

Takeaway: To use the term ‘independent’ in Singapore, a financial adviser must be free from product restrictions and must not retain any commissions or benefits from product providers.

Correct: Under the Code on Collective Investment Schemes (CIS Code) and the Securities and Futures Act (SFA), the trustee of a Singapore-authorized unit trust has a fiduciary duty to exercise due diligence and vigilance over the manager’s activities. This includes ensuring the manager complies with the investment guidelines, borrowing limits, and the terms of the trust deed. A proactive approach is necessary because the trustee acts as an independent watchdog for the unitholders, ensuring that the manager operates within the authorized mandate.

Incorrect: Relying solely on the manager’s self-reporting or internal audits is insufficient because the trustee is required to provide an independent layer of oversight to protect unitholders from potential manager negligence or misconduct. Delegating oversight to the manager’s own compliance department is inappropriate as it undermines the fundamental separation of duties between the manager and the trustee. While the Monetary Authority of Singapore (MAS) provides regulatory supervision, the trustee has specific statutory and contractual obligations under the trust deed that require active, ongoing monitoring of the manager’s daily operations regarding the fund’s assets.

Takeaway: The trustee of a Singapore-authorized CIS must maintain independent and proactive oversight of the manager’s compliance with the CIS Code and trust deed to fulfill its fiduciary duty to unitholders.

Correct: In Singapore, fund managers are expected to act as responsible stewards of the capital they manage. According to the principles of stewardship and the expectations for Collective Investment Schemes, managers should have a clear policy on how they exercise voting rights in underlying equity investments. They are required to disclose a summary of this policy to unitholders (typically through the prospectus or the manager’s website) and should be prepared to provide information on how those votes were actually cast when requested by investors.

Incorrect: The suggestion that voting disclosures are limited only to ESG-themed funds is incorrect because stewardship and voting transparency are broader expectations for all fund managers under general governance frameworks. The claim that records are only filed with the SGX is inaccurate as unitholders of both listed and unlisted retail funds have a right to understand how their interests are represented. Describing voting records as proprietary secrets to avoid disclosure is incorrect, as transparency in corporate governance is a regulatory priority in Singapore’s financial ecosystem.

Takeaway: Fund managers in Singapore must maintain and disclose a voting policy summary and provide specific voting records to unitholders upon request to ensure transparency and stewardship.

Correct: Under the IMAS Code of Ethics and Standards of Professional Conduct, which is highly relevant to CIS managers in Singapore, performance data for a period of less than one year should not be shown. Furthermore, the code specifically prohibits the annualization of returns for any period of less than one year because such figures can be highly volatile and misleading to retail investors.

Incorrect: Presenting returns for periods less than one year, even with a benchmark comparison or disclaimer, is generally discouraged or prohibited in standard marketing materials to maintain consistency and prevent cherry-picking short-term gains. Annualizing returns for periods under twelve months is a violation of transparency standards as it mathematically extrapolates short-term performance into an unrealistic annual expectation. Substituting performance with a ‘flagship’ fund (representative or model performance) is subject to very strict disclosure rules and does not negate the requirement to wait for a one-year track record for the specific fund being promoted.

Takeaway: In Singapore, Collective Investment Scheme performance data must cover at least one year, and annualizing returns for periods shorter than twelve months is prohibited to prevent misleading investors.

Correct: According to the Code on Collective Investment Schemes (Appendix 1) issued by the Monetary Authority of Singapore (MAS), if an investment limit is breached due to circumstances beyond the manager’s control (a passive breach like a merger), the manager must take all necessary steps to rectify the breach. This rectification must occur within a reasonable period, which is generally defined as not more than three months from the date of the breach, taking into account the interests of the participants.

Incorrect: Maintaining the position indefinitely is incorrect because concentration risk rules are meant to ensure diversification, and passive breaches still require rectification. Immediate liquidation within two business days is not a regulatory requirement and could lead to fire-sales that harm investors. Seeking a formal waiver before divestment is not the standard procedure for rectifying passive breaches under the CIS Code; the manager is expected to act within the three-month window.

Takeaway: In Singapore, passive breaches of single entity investment limits in authorized schemes must be rectified within three months while prioritizing the interests of the fund’s participants.

Correct: According to the Code on Collective Investment Schemes (CIS Code) issued by the Monetary Authority of Singapore (MAS), the manager of an authorized scheme must notify MAS immediately of any suspension of dealings and the reasons for it. Furthermore, the manager is also required to notify MAS immediately upon the resumption of dealings to ensure continuous regulatory oversight.

Incorrect: The requirement to notify within two business days is incorrect as the CIS Code mandates immediate notification to ensure MAS is aware of potential systemic or fund-specific liquidity issues. The suggestion that notification is only required for suspensions exceeding five days is incorrect because any suspension, regardless of duration, triggers the immediate notification requirement. Seeking prior approval is not a requirement; while the manager must act in the best interests of unitholders, they have the discretion to suspend dealings first and notify MAS immediately thereafter.

Takeaway: Managers of Singapore-authorized CIS must provide immediate notification to MAS for both the commencement and the cessation of any suspension of dealings in units.