CMFAS Module 10 - REIT (MAS) - Quiz 1 - Mae
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CMFAS Module 10 – REIT(MAS) Test
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Question 1 of 30
1. Question
Which of the following statements is incorrect about a REIT manager on obtaining the approval of the MAS regarding the capital markets service license?
Correct
The Sponsors are major holders or owners of the REIT, and the REIT managers did not choose them. It is the Sponsor who wholly-owns the REIT managers.
Incorrect
Take note that the REIT managers need to adhere to the licensing criteria imposed by the MAS. They must satisfy the MAS regards with appointing the CEO, Directors, and Representatives as stated in the SFA section 93.
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Question 2 of 30
2. Question
What is the role of REIT managers?
I. Accountable to unitholders for REIT’s assets management and the REIT performance
II. Checking the business’ compliance with the capital standards
III. Ensures the appropriate corporate governance of investors
IV. Assess the physical fitness of the investorsCorrect
MAS means “fit and proper” is a competent person, with honesty and integrity, and financially capable. They want that the person would be responsible enough to do all work with strict compliance with the regulations.
Incorrect
It is under the general law all are duties of REIT managers: accountable to unitholders for REIT’s assets management and the REIT performance, checking the business’ compliance with the capital standards, ensures the appropriate corporate governance of investors, except assessing investor’s physical fitness. Instead, they evaluate the abilities of the persons who will bring growth and development to the REIT.
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Question 3 of 30
3. Question
How long should a REIT manager notify MAS of the CEO or director’s resignation?
Correct
The REIT manager must do a notification to the MAS as soon as practicable.
Incorrect
It is under the guidelines in licensing criteria and corporate governance arrangements for REIT managers that the MAS must be notified in any case not later than 14 days from the date the CEO or director tender the resignation.
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Question 4 of 30
4. Question
How the REIT managers and shareholders will avoid a conflict of interest with unitholders?
Correct
The MAS proposed to forbid compensation such as shares, which might result in misalignment of interests.
The REIT managers and its directors will be subjected to criminal and civil liability when they failed to comply with their statutory duties.Incorrect
As proposed by MAS, to lessen or avoid conflict of interests possibilities to unitholders with Sponsors and REIT managers, the following shall be prohibited:
(a) payment in the form of shares or interests in the Sponsor or its related entities, or (b) linked in any way to the performance of any entities other than the REIT. -
Question 5 of 30
5. Question
Which of the following statements is true on holding Annual General Meetings (AGMs)?
I. All public companies and business trusts are required to hold AGMs, according to the Companies Act and the Business Act.
II. REITs are not required to hold AGMs, but Unitholders of REITs are allowed to request for a meeting under the provision of Property Fund Guidelines.
III. The SGX requires the listed companies and business trusts to hold their AGMs within five months of the end of their financial year.
IV. The REITs are governed as Collective Investment Schemes (CIS) under the Securities and Futures Act (SFA) but are not subject to compliance with the requirements set out by SGX’s listing manual.Correct
The REITs also need to comply with the SGX’s listing manual. The holding of AGMs should be within four months of the end of the financial year, as propelled by SGX.
Incorrect
It is clearly stated in SFA that REITs are subject to the Property Fund Guidelines in the Code on Collective Investment Schemes(CIS), which means that they have to comply with the requirements set out in SGX’s Listing Manual. There also are provisions within the Property Fund Guidelines which allowing unitholders of REITs to request for a meeting to be convened under certain circumstances.
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Question 6 of 30
6. Question
Who, in case of the absence of the REIT manager, could be appointed as the representatives?
Correct
Individuals on asset management, investment management, financing, marketing, and investor relations will serve as the REIT manager’s representatives.
Incorrect
Take note that individuals who are not related to and with no expertise on REIT are not qualified to become representatives. Only those who are members of the REIT are allowed to represent the manager on his or her behalf.
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Question 7 of 30
7. Question
Which of the following defines Sponsor?
I. the entity that provides a right of first refusal with any asset to the REIT
II. the entity which determines properties into the REIT’s initial portfolio that to be injected into the initial portfolio of the REIT at the time of listing
III. the entity which is not required to have Nominating Committee
IV. the entity which subjected to propose an appointment for a rigorous reviewCorrect
The MAS suggested characterizing the Sponsor as of the following:
a. the entity that determines the properties to be injected into the initial portfolio of the REIT at the time of listing
b. the entity that provides the REIT with a right of first refusal in relation to any asset
c. the entity that represents itself as a Sponsor of the REIT in any prospectus, circular, announcement, marketing material or other relevant report or document, or its successor.Incorrect
Please take note that it is the REIT manager, not the Sponsor, who proposes an appointment to have a review of whether the director had previously worked on the Board of Sponsor. Also, the REIT managers are not listed as entities.
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Question 8 of 30
8. Question
What are the qualifications to get a REIT Management License?
I. A REIT manager should have established track records in managing, investing in, or advising on the type of real estate investments by the REIT for the past three years at a minimum
II. A REIT manager should satisfy the Monetary Authority of Singapore (MAS) of its controlling shareholders have good rankings overseas
III. A REIT manager in Singapore should conduct accounting, compliance, and investor relations
IV. A REIT manager should satisfy the MAS that it will discharge its duties efficiently, honestly, and fairlyCorrect
A REIT manager should have established track records in managing, investing in, or advising on the type of real estate investments by the REIT for the past five years to a minimum and have good rankings in their home countries.
Incorrect
Based on the guidelines set out by MAS, the REIT manager should qualify with the following criteria to have a REIT management license:
1. A REIT manager should satisfy MAS that its controlling shareholders, where applicable, have established track records in managing, investing in, or advising on the type of real estate to be invested by the REIT, for the past 5 years at a minimum.
2. A REIT manager should satisfy MAS that its controlling shareholders, where applicable, have good rankings in their home countries.
3. A REIT manager should conduct the following activities, in relation to the management of the REIT, in Singapore: (a) accounting; (b) compliance; and (c) investor relations. -
Question 9 of 30
9. Question
Which reason is not included in the need for the REITs to conduct Annual General Meetings (AGMs)?
Correct
Remember that AGMs serves as a channel for communication for REIT managers and unitholders. When a general mandate is approved by unitholders, REITs will be able to issue new units promptly on time. Thus, REITs could be more flexible in reacting with the limits of the general mandates.
Incorrect
Conducting mandatory AGMs is essential for the following reasons:
it helps to strengthen the corporate governance regime for REITs in Singapore
it will allow the manager to obtain or renew a general mandate from unitholders for the issue of new units in the coming year -
Question 10 of 30
10. Question
What are the income support arrangements factors in acquiring properties in the structuring of REITs?
I. The vendor of a property dealing with a maximum of rental for years after acquiring the property.
II. The property seller makes a master lease agreement with the REIT at rents relatively higher than the current underlying leases.
III. A REIT is acquiring a property under a sale and leaseback arrangement wherein the seller agrees to a relatively short and expensive lease for its use.
IV. A REIT raising IPO proceeds and use it to support distributions to shareholders’ post-listings.Correct
Under the use of income support arrangements, the property seller allowed only a minimal deal on rentals for several years after the REIT acquired the property.The property seller will enter into a master lease agreement with the REIT at rents which are significantly higher than the existing rents of the underlying leases.
Incorrect
The use of income support arrangements has been useful in acquiring the property wherein:
1. a REIT acquiring a property under a sale and leaseback arrangement, under which the vendor agrees to a relatively short but expensive lease for its own use
2. a REIT raising IPO proceeds (above the amount needed to acquire the initial portfolio) and using these proceeds to support distributions to unitholders post-listing -
Question 11 of 30
11. Question
What should the REIT do when they breached an agreement or contract associated with any arrangements or bank loan?
Correct
It is clearly stated in the Securities and Future Act under Securities and Securities-based Derivatives Contracts that if the REIT is in breach of any of the terms and conditions or covenants associated with any credit arrangement or bank loan which could materially affect the REIT’s financial position and results or business operations, or the investments by participants in the REIT, should provide the following:
a. a statement of that fact
b. details of the credit arrangement or bank loan
c. any action taken or to be taken by the Manager to rectify the situation (including the status of any restructuring negotiations or agreements, if applicable)Incorrect
It is clearly stated in the Securities and Future Act under Securities and Securities-based Derivatives Contracts that if the REIT is in breach of any of the terms and conditions or covenants associated with any credit arrangement or bank loan which could materially affect the REIT’s financial position and results or business operations, or the investments by participants in the REIT, should provide the following:
a. a statement of that fact
b. details of the credit arrangement or bank loan
c. any action taken or to be taken by the Manager to rectify the situation (including the status of any restructuring negotiations or agreements, if applicable) -
Question 12 of 30
12. Question
Which of the following is true on deciding members of the Audit Committee (AC)?
I. It must comprise of executive directors.
II. The AC Chairman is independent.
III. AC should consist of at least four directors in alignment with the CG Code.
IV. The AC must consist only of non-executive directors.Correct
In alignment with the CG Code, the MAS proposed to at least have three directors on the Audit Committee.
Incorrect
MAS proposed that choosing the members of the Audit Committee (AC) should meet the following requirements:
The AC must comprise only non-executive directors, the majority of whom, including the AC Chairman, should be independent.
Despite no minimum requirement for the number of directors, MAS proposed to have at least three directors on the AC. -
Question 13 of 30
13. Question
How will the REIT increase transparency and accountability?
Correct
Increasing transparency and accountability of the REITs include the following, disclosing the total expenses of the REIT, all fees from the manager to the adviser, and interested parties. Present a detailed explanation of material deviation, both actual and forecast DPU.
Incorrect
To increase the transparency and accountability of the REITs in terms of Deviations of Actual Distributions per Unit from Forecast Distributions per Unit, the MAS requires that the annual reports shall disclose the following: (1)any material deviation of the actual DPU from the forecast DPU, together with a detailed explanation of the deviation, (2)the total operating expenses of the REIT including all fees paid to the manager, adviser and interested parties, and (3)the distributions declared by the REIT for the financial year.
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Question 14 of 30
14. Question
What is to consider in prioritizing the interests of REIT Unitholders?
Correct
A statutory duty is imposed to the REIT and its directors to avoid conflict of interests. The directors of a company are accountable for its shareholders’ interests. Strictly implementing these duties, unitholders’ interest will not be compromised.
Incorrect
Under the general law, fiduciary duties are imposed on the directors and statutory duties on the REIT managers. These duties will enhance the protection of REIT unitholders’ interests and are consistent with the requirements that are applicable to trustee-managers of business trusts.
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Question 15 of 30
15. Question
Which of the compliance function under the operational requirements of the REIT Manager is true?
I. The REIT requires to conduct compliance activities and to have a dedicated compliance function.
II. The Audit Committee (AC) has required a dedicated compliance function due to the reason that greater market conduct risks.
III. The REIT manager reviews and reports on the Board the adequacy and effectiveness of the compliance controls of the company.
IV. The Audit Committee (AC) take into account the size of the REIT’s property portfolio and consider its type.Correct
Please note that on the operational requirements, unlike in Licensed Fund Management Companies, which are required to have a dedicated compliance function due to the greater market conduct risks, the REIT managers are not required to have a dedicated compliance function.
The AC considers the type of properties that the REIT invests in. It takes into account the size of the REITs’ property portfolio.Incorrect
On Operational requirements, the REIT managers are outsourcing their compliance function to their Sponsor or related entities, but under the CG Code, the Audit Committee is responsible for reviewing and reporting to the Board of the REIT manager, the adequacy and effectiveness of the compliance controls of the company.
MAS proposes to require the AC of the REIT manager to state, in the REIT annual reports, whether the compliance arrangements of the REIT manager are adequate and effective, taking into account the nature, scale, and complexity of the REIT manager’s operations. -
Question 16 of 30
16. Question
What is the needed information to include in the Offer of REIT Bonds?
I. names and contact numbers of the trustee, fiscal agent or any other representative for the holders of the REIT Bonds
II. names and addresses of the Manager, and each of the directors or equivalent persons of the Manager
III. names and contact numbers of issue manager to the offer and the underwriter to the offer
IV. name and address of the guarantor entityCorrect
Based on Securities and Future Act under the provisions of the Second Schedule in an Offer Information Statement for an Offer of REIT Bonds, basic information such as names and addresses of the following shall be stated:
1. Directors (the Manager and each of the directors or equivalent persons of the Manager)
2. Advisers (the issue manager to the offer, if any; the underwriter to the offer, if any; the legal adviser for or in relation to the offer, if any; and the paying agent of the REIT.
3. Guarantor Entity, Advisers and Agents
4. trustee, fiscal agent or any other representative for the holders of the REIT BondsIncorrect
Based on Securities and Future Act under the provisions of the Second Schedule in an Offer Information Statement for an Offer of REIT Bonds, basic information such as names and addresses of the following shall be stated:
1. Directors (the Manager and each of the directors or equivalent persons of the Manager)
2. Advisers (the issue manager to the offer, if any; the underwriter to the offer, if any; the legal adviser for or in relation to the offer, if any; and the paying agent of the REIT.
3. Guarantor Entity, Advisers and Agents
4. trustee, fiscal agent or any other representative for the holders of the REIT Bonds -
Question 17 of 30
17. Question
What are to include in the Time Table as requirements in the making of the Offer Information Statement for the Offer of REIT Bonds on the Second Schedule?
Correct
The disclosure of every detail included in the Offer Information Statement for An Offer of the REIT Bonds is essential to provide to the potential investors. The offer procedure is of course requires varies approach to different investors.
Incorrect
Securities and Future Act under the particulars set out in the Second Schedule of An Offer Information Statement for the REIT Bonds, the following shall be indicated:
1. the the time at, date on, and period during which the offer will be kept open, and the name and address of the person to whom the purchase or subscription applications are to be submitted
2. the circumstances under which the offer period may be extended or shortened and the duration by which the period may be extended or shortened
3. how any extension or early closure shall be made public -
Question 18 of 30
18. Question
When a credit rating has disclosed, what information must be provided by the REIT?
I. An account that says the credit rating is a statement of facts
II. A public declaration of a specific course or source of information where to obtain the rating methodology used by the credit rating agency, relative ranking, an explanation of the meaning and limitations of the credit rating, etc.
III. An emphasis that the credit rating is irrevocable
IV. A statement which tells that the investors prohibit investment evaluationCorrect
Whether not a credit rating has given, the REIT shall state the fact. Provide a statement that not having a credit rating means that no independent assessment by a credit rating agency of the default risk of the REIT, its guarantor entity, and the REIT Bonds being offered has been made.
Incorrect
The REIT shall ensure to make statements that won’t put the REIT Bonds at stake. Note that credit rating may be revised or withdrawn, and not a recommendation. It must highlight that investors will evaluate the investment.
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Question 19 of 30
19. Question
What are the following conditions that should be subjected to the Offer Information Statement to have an exemption in the offer?
I. The offer information statement shall comply with the requirements set out in the First Schedule, and shall contain the particulars set out in the Second Schedule.
II. The offer is within three months from the date of lodgment with the Authority should be made.
III. The Manager or the person making the offer should sign the offer information statement.
IV. The offer of the REIT Bonds makes in or accompanies an offer information statement, which a person names as the underwriter in the offer. The offer information statement shall be issued unless the person has given and has not withdrawn his consent.Correct
The REIT makes the REIT BONDS offer within six months from the date of lodgment, as stated in the Securities and Futures Act (Chapter 289) section 3.
Incorrect
As cited in the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) (Exemption from Subdivisions (2) and (3) of Division 1 of Part XIII for REIT Bonds) Regulations 2011, the conditions on the exemption for the offer made using OIS some are as follows:
a. comply with the requirements set out in the First Schedule
b. contain the particulars set out in the Second Schedule
c. signed by every director or an equivalent person of the Manager and every person who is named in the offer information statement as a proposed director or an equivalent person of the Manager -
Question 20 of 30
20. Question
Why does the leverage limit of total assets limit to 35% to 60% to the REIT?
Correct
Please note that on the other hand, MAS is proposing to adopt a single-tier leverage limit of 45% without a credit rating requirement and dismiss the necessity of a credit rating to leverage up to 60%. This is to ensure to limit the REITs on the risk of refinancing.
Incorrect
Under the borrowing limits in the Property Fund Guidelines of the Code on Collective Investment Scheme (CIS) states that the total borrowings and deferred payments of a REIT will not exceed 35% of the funds deposited property. The leverage limit may rise to a maximum of 60% when a credit rating is obtained and disclosed to the public. This rule is to ensure that REITs will not over-extend themselves by pursuing highly geared property acquisitions.
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Question 21 of 30
21. Question
Which of the following board independence requirements is not true?
Correct
The Board of the directors of the REIT managers is responsible for handling the management’s performance and providing objective judgment on whether transactions proposed for the REIT are in the interests of unitholders.
The Code of Corporate Governance (CG) requires that the board is composed of at least a minimum of one-third independent directors.Incorrect
According to account feedback from market participants, the MAS made options with underlying conditions on how to enhance the independence requirements wherein the REIT managers should ensure that the majority of the board or at least half or one-third are independent directors.
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Question 22 of 30
22. Question
Which of the following tackles the exemption condition for the offer using the information statement through an automated teller machine?
Correct
Per the guidelines set on Securities and Future Act, inform the prospective purchaser or subscriber on the OIS before enabling them to apply the automated teller machine. Require the prospective purchaser or subscriber to read and understand all the information before they submit their application.
Incorrect
In the exemption for an offer made using offer information statement through an automated teller machine: before the prospective subscriber or purchaser apply to subscribe for or purchase the REIT Bonds, he/she must be informed of how to obtain, or arrange to receive, a copy of the offer information statement relating to the offer.
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Question 23 of 30
23. Question
What will the REIT do when the offered REIT Bonds have received a credit rating?
I. expose the short-term or long-term credit rating
II. keep the name of the credit rating agency confidential
III. any fee or benefit of any kind transacted by the REIT must be unmentioned
IV. disclose when was the credit rating was givenCorrect
In case a credit rating agency has not given credit rating to all of the REIT, its guarantor entity, and the REIT Bonds being offered, they need to disclose it. They need to state that no credit rating is given, but an independent assessment of the default risk of the REIT, its guarantor entity, and the REIT Bonds has been made.
Incorrect
Particulars to be included in An Offer Information Statement for An Offer of Reit Bonds following the SFA guidelines: the name of the credit rating agency, the credit rating, payment transactions to the credit rating agency, and date when the REIT got a credit rating was given must be publicized.
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Question 24 of 30
24. Question
How are REIT managers being compensated?
Correct
REIT managers normally receive an acquisition fee (1% of the purchase consideration) or divestment fee (0.5% to 1% of the sale consideration) when a REIT makes an acquisition or a divestment. However, the pegging of the acquisition fee is not proportioned when the valuation of the transacted property is large compared with the amount of the managers’ effort.
Incorrect
REIT managers’ fees and incentives include management fees, acquisition fees, divestment fees, and development management fees (a base fee and performance fee). The base fee is computed based on a fixed percentage of the value of the REIT’s deposited properties, and the performance fee is pegged to certain metrics.
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Question 25 of 30
25. Question
What is the importance of the front cover in making the offer information statement for the offer of REIT Bonds?
I. It serves as a guideline on making any investment in the offered REIT Bonds.
II. It tells the suitability of the offered investment in the REIT Bonds.
III. It shows that the investment is an authorized or a recognized document, and lodged with the Monetary Authority of Singapore.
IV. It reflects that you are not responsible for your investments.Correct
Please note that it was stated in the OIS of the Offer for the REIT Bonds that any agreement made should be stated in the front cover, and the prospected investors are accountable for his/her chosen investment.
Incorrect
On the front cover of the OIS, all the necessary information on making investments in the REIT Bonds, such as date of lodgment of the OIS, name of the REIT, persons related, and others, must be carefully provided.
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Question 26 of 30
26. Question
What should be declared in the offer when creating Offer Statistics and Time Table?
I. nature and denomination of the REIT Bonds
II. amount of subscriptions and allocation of the reduced amount
III. confidentiality of the final amount of subscriptions
IV. face value of the REIT BondsCorrect
It is stated that in the particulars to be included in the OIS of the Offered REIT Bonds: the investors are entitled to know everything up to the final amount of subscriptions sought. The confidentiality of matters regarding the REIT Bonds is not listed on the guidelines.
Incorrect
The OIS of the Offer of the REIT Bonds must include in its Offer Statistics the following: where the amount of subscriptions sought is fixed and is not at the date of the lodgment, the nature and denomination of the REIT Bonds being offered, where the number of REIT Bonds being offered is fixed and is not at the date of lodgment, the face value of the REIT Bonds being offered, and the currency of the issue.
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Question 27 of 30
27. Question
What is the substantial information to provide on the REIT as a requirement on the Offer of REIT Bonds?
I. nature of operations and principal activities of the REIT
II. summaries of all material contract
III. illegitimate proceedings
IV. obsolete and outdated participants’ funds in and borrowings of the REITCorrect
*Note that funds and borrowings of the REIT should be updated and that the REITs’ proceedings are legal.
Incorrect
The following information should be provided on the REIT per by the guidelines on the OIS for the Offer of the REIT Bonds:the nature of operations and principal activities of the REIT, the general development of the REIT from the beginning of the period comprising the 3 most recent completed financial years to the latest practicable date, indicating any material change in the affairs of the REIT, the participants’ funds in and borrowings of the REIT, number of units of the REIT owned by each substantial participant, any legal or arbitration proceedings
where any units in the REIT have been issued within the 12 months, a brief summary of each material contract that could result in the trustee of the REIT being under an obligation or entitlement that is material to the ability of the REIT to meet its obligations to holders of the REIT Bonds. -
Question 28 of 30
28. Question
How will you determine if the offered REIT Bonds are secured?
Correct
The Auditors show a secured REIT Bonds with a tabular summary of the aggregate values of the tangible assets (owned by the REIT, owned by each, or jointly owned by 2 or more, of its guarantor entities, and jointly owned by the REIT and one or more of its guarantor entities), the amounts outstanding of the aggregate amounts borrowed, and the amount of advances by the REIT to related corporations or related entities of the REIT, distinguishing between advances which are secured and advances which are unsecured.
Incorrect
The Auditors show a secured REIT Bonds with a tabular summary of the aggregate values of the tangible assets (owned by the REIT, owned by each, or jointly owned by 2 or more, of its guarantor entities, and jointly owned by the REIT and one or more of its guarantor entities), the amounts outstanding of the aggregate amounts borrowed, and the amount of advances by the REIT to related corporations or related entities of the REIT, distinguishing between advances which are secured and advances which are unsecured.
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Question 29 of 30
29. Question
Why did the MAS require the REIT managers to acquire Professional Indemnity Insurance (PII)?
I. REIT managers have high possibilities of exposures to wrongful claims and illegal proceedings because of their roles in the REIT management.
II. REIT managers could suffer from carrying out their duties that might be payable out of the REIT assets.
III. REIT managers are not liable for the legal costs of negative claims regarding their roles.
IV. REIT managers could use the PII to protect themselves against civil, criminal, investigative, and regulatory proceedings.Correct
In pursue of the Securities and Future Acts, the REIT managers must need to acquire PII, which covers the legal costs and expenses upon the arising of claims. MAS notes that the trust deed for a REIT usually demands that liabilities and claims that a manager may suffer in carrying out its duties may be payable out of the REIT assets trust deed by the REIT manager.
Incorrect
The REIT manager is liable to legal costs when liabilities and claims arose from any fraud, gross negligence or wilful default of the REIT manager, or a breach of the trust deed by the REIT manager. The minimum set of the amount of coverage must comply, which is S$100m.
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Question 30 of 30
30. Question
Which of the following statements is true regarding the Plan of Distribution on the offer of the REITs Bonds?
Correct
In the Plan of Distribution in the OIS, state the amount, and outline briefly the plan of distribution of the REIT Bonds that are to be offered. Have a thorough description of the distribution plan if the REIT Bonds are to be offered through the selling efforts of any broker or dealer.
Incorrect
It is necessary to explain the plan of distribution and the terms of the agreement present in the OIS on the offer of the REIT Bonds to establish securities on the investments.