The test for who may be regarded as an accredited investor has been tightened. In addition, from 8 January 2019, new customers who qualify under the quantitative criteria to be accredited investors must specifically consent to being classified as accredited investors. Individuals that are existing clients are grandfathered until 8 July 2020.

The Securities and Futures (Amendment) Act 2017 has now come into force, with the regulatory regime on short selling coming into force on 1 October 2018 and all the remaining provisions amending the Securities and Futures Act coming into force on 8 October 2018. We have previously written about the changes introduced by the Securities and Futures (Amendment) Act 2017 (see “Slew of Amendments to the Securities and Futures Regime to Be Passed​”). In this update, we will look at the new opt-in regime for “accredited investors” and “institutional investors” which will be implemented by 8 January 2019 pursuant to the new Securities and Futures (Classes of Investors) Regulations 2018 (Regulations).

The new definition of “accredited investor”

The definition of “accredited investor” as applied to individuals has been amended in the following manner:

Prior to 8 October 2018 As from 8 October 2018

The individual’s net personal assets exceed SGD2 million in value. There was no limit on the value of the individual’s primary residence that could be used to determine the individual’s net personal assets. In determining the total value of the individual’s net personal assets, the net value of his primary residence that may be used is capped at SGD1 million.

No separate criteria for financial assets. The individual’s net financial assets (i.e., deposits and investment products) exceed SGD1 million.

The individual’s income in the preceding 12 months is not less than SGD300,000. No change.

As from 8 October 2018

In determining the total value of the individual’s net personal assets, the net value of his primary residence that may be used is capped at SGD1 million.

The individual’s net financial assets (i.e., deposits and investment products) exceed SGD1 million.

No change.

There has been no change to the criteria for corporations, which continues to be net assets exceeding SGD10 million in value.

The new definition applied as from 8 October 2018. Before entering into new transactions with existing clients that are accredited investors, financial institutions should verify whether they continue to be accredited investors under the new definition. For individuals that no longer qualify as accredited investors, the change will not affect transactions that they entered into prior to 8 October.

The new definition of “institutional investor”

Except for statutory boards, persons who were institutional investors under the previous definition continue to be institutional investors under the new definition. Under the new definition, only statutory boards that have been prescribed qualify as institutional investors.

Otherwise, the definition of “institutional investor” has been expanded. The new definition includes the following persons as institutional investors:

• Sovereign wealth funds and central governments 

• Prescribed international agencies (e.g., IMF, ADB, World Bank) 

• Financial institutions that are financial market infrastructure (e.g., clearing houses, trade repositories) 

• Entities carrying out financial services in another jurisdiction and are regulated by an authority akin to the MAS 

As with the definition of “accredited investor”, the new definition of “institutional investor” applied as from 8 October.

The opt-in requirement

As from 8 January 2019, a person that meets the criteria to be an accredited investor may only be treated as an accredited investor if he opts to be treated as such. The opt-in requirement is set out in the Regulations and applies to all persons that qualify under the definition of accredited investor, whether individuals, corporations or trustees.

Accordingly, as from 8 January 2019, the counterparty (typically, the relevant financial institution seeking to market or offer an investment product to a client or potential client) must inform the potential investor in writing as to the legal consequences and risks of being treated as an accredited investor; the investor must in turn acknowledge these risks in writing and consent to being treated as an accredited investor. The specific statements to be provided and received are set out in the Regulations.

The choice of whether to be treated as an accredited investor is specific to a counterparty and cannot be relied upon by another counterparty. The corollary of this is that a person who has opted to be treated as an accredited investor by one counterparty will need to opt-in to be treated as an accredited investor if dealing with another counterparty, and may choose to not do so with respect to that other counterparty.

A person who has chosen to be treated as an accredited investor may at any time withdraw his consent to being so treated. 

Grandfathering of existing clients

Where investors are existing clients of the counterparty and meet the requirements of the new definition, their status as accredited investors will be grandfathered. For such investors, they must be informed prior to 8 January 2019 of the legal consequences and risks of being treated as an accredited investor and given the choice to opt-out. If they do not choose to opt-out, they may continue to be treated as accredited investors. For such investors that are individuals, the grandfathering provisions only apply until 8 July 2020, after which time they must expressly opt-in to being treated as accredited investors in order to continue to be treated as such. It should be noted that existing clients that do not meet the requirements of the new definition cannot be grandfathered.