APAC Monthly Private Wealth Legal Developments – March 2022

Welcome to Herbert Smith Freehills’ monthly private wealth industry updates in Asia.

Every month we survey ten Asian jurisdictions for legal developments concerning trust and estate planning which are of interest to the private wealth industry, and provide a succinct summary in a table format.  The jurisdictions covered in the update are Hong Kong, Singapore, China, Taiwan, Japan, India, Malaysia, Indonesia, Thailand and the Philippines. We hope that these updates will prove to be a useful resource to keep private clients, business people, and lawyers abreast of legal updates in the region.

Hong Kong

HKEX issues guidance letter regarding SPAC escrow accounts

The Hong Kong Exchanges and Clearing Limited (HKEX) issued a guidance letter on the qualifications and obligations of a trustee or custodian regarding the operation of the escrow account of a special purpose acquisition company (SPAC) under Rule 18B.17 of the Main Board listing rules. The guidance letter sets out, among other things, that the trustee or custodian must have been accepted by the Securities and Futures Commission (SFC) for existing SFC-authorised collective investment schemes (CISs) and be independent of the SPAC, and imposes obligations of reasonable care to monitor cash flows of the escrow account. A trustee or custodian is also required to enter into an undertaking with The Stock Exchange of Hong Kong to comply with its obligations under the guidance letter.

FATF amends Recommendation 24 on beneficial ownership

The global Financial Action Task Force (FATF) formally amended Recommendation 24, which requires its member countries to collect information on the beneficial ownership of legal persons through a number of mechanisms. FATF stated that its rationale for the amendment arose from the evolving anti-money laundering risks and misuse of shell companies. Member countries are now required to apply extra measures, such as obtaining information held by regulated financial institutions, professionals, regulators and stock exchanges, and determine whether extra precautions are necessary using a risk-based approach.

Financial Secretary announces consultation on family office tax breaks in 2022-23 budget speech

Hong Kong's financial secretary, Mr Paul Chan, set out his proposals for the development of Hong Kong as an international financial centre in his 2022-23 Budget Speech, including a plan by the government to consult stakeholders on the provision of tax concessions for eligible family investment management entities managed by single-family offices, with the aim of implementing the concessions in the 2022/2023 year of assessment.

SFC concludes consultation on regulating depositaries of public funds and further consults on implementation details

The SFC published its consultation conclusions and commenced a further consultation on the proposed regulatory regime for depositaries (ie top level trustees and custodians) of CISs.  In September 2019, the SFC issued a consultation paper proposing a new Type 13 regulatory activity (RA 13) to regulate depositaries of SFC-authorised CISs.  The SFC now seeks feedback on a number of aspects concerning implementation, such as proposed amendments to subsidiary legislation relating to client securities and client money, and proposed amendments to the SFC's main code of conduct and Fund Manager Code of Conduct. The public is invited to submit their feedback on the further proposals by 30 April 2022.

Singapore

MAS updates Code on Collective Investment Schemes

The Monetary Authority of Singapore (MAS) issued an updated Code on Collective Investment Schemes (the Code). The Code is issued pursuant to section 321 of the Securities and Futures Act (Cap. 289) (SFA) and sets out the best practices on management, operation and marketing of schemes that managers, approved trustees, directors of a variable capital company (VCC), and custodians of a VCC or a sub-fund thereof, are expected to observe. The update amends Chapter 3.1(d) to require managers to comply with Notice SFA 04-N16 on execution of customers' orders.

MAS responds to COS on retail CBDC in Singapore

MAS published its response to the Committee of Supply 2022 (COS) regarding a digital Singapore dollar. Like central banks in a number of other jurisdictions, MAS determined that the case for a retail central bank digital currency (CBDC) for Singapore is 'not compelling' at this point in time. MAS commented that financial inclusion and payments efficiencies are frequently cited as reasons in support of CBDCs, but neither are presently a significant problem in Singapore. However, MAS has not ruled out the possibility and continues to develop relevant capabilities in the CBDC space.

MAS publishes Ministerial Statement on security of digital banking

MAS published the Ministerial Statement made by Mr Lawrence Wong, Minister for Finance and Deputy Chairman, regarding bolstering the security of digital banking.  Mr Wong addressed the recent spate of phishing and outlined MAS's expectations of banks to ensure the security of digital banking channels.  He explained that MAS had accelerated the process of strengthening controls to prevent scams across all retail banks, highlighting the additional measures announced with the Association of Banks in Singapore in January. Mr Wong set out a number of further measures which are under consideration, including the improvement of fraud surveillance capabilities, expanding the use of biometric technology, and encouraging the transition towards using mobile banking apps for customer authentication, transaction authorisation, and bank notifications.

India

RBI issues notification on implementation of CFSS by NBFCs

The Reserve Bank of India (RBI) has issued a notification to all non-banking financial companies (NBFCs) regarding the mandatory implementation of the Core Financial Services Solution (CFSS). The RBI comments: 'The CFSS shall provide for seamless customer interface in digital offerings and transactions relating to products and services with anywhere / anytime facility, enable integration of NBFCs’ functions, provide centralised database and accounting records, and be able to generate suitable MIS, both for internal purposes and regulatory reporting.'  The notification sets out the timeframe for implementation for each category of NBFC.

Thailand

SECT amended regulations effective – custody of clients' digital assets

The Securities and Exchange Commission of Thailand (SECT) announced that amended regulations on the custody of clients' assets in digital asset businesses became effective on 1 March 2022.  The amendments are intended to enhance investor protection and affect regulations on keeping custody, withdrawal and transfer of clients’ fiat money, and seeking benefits from clients’ assets (both fiat money and digital assets) for the clients’ interest.

Philippines

BSP releases regulatory reporting standards for OPS

The Bangko Sentral ng Pilipinas (BSP) issued regulatory reporting standards for Operators of Payment Systems (OPS) registered with the BSP in accordance with the National Payment Systems Act (NPSA). These  require an OPS to establish a reporting system that will aggregate all pertinent data and produce the reports required in a timely manner. To facilitate generation of such information, the board of directors and senior management of an OPS are directed to implement an effective management information system that enables independent validation and periodic independent review of OPS reports.

SECP issues circular on disqualification of directors, trustees and officers

The Securities and Exchange Commission, Philippines (SECP) issued a memorandum circular regarding the disqualifications of directors, trustees and officers of corporations, and the guidelines on the procedure for their removal. The disqualification criteria include convictions for criminal offences and administrative liability for offences involving fraudulent acts by courts or regulators of the Philippines or their overseas equivalent.

BSP launches National Financial Inclusion Strategy

BSP announced the launch of the National Strategy for Financial Inclusion (NSFI) 2022-2028, a blueprint for broad-based growth and financial resilience. NSFI priority initiatives include: promoting inclusive digital finance; strengthening financial education and consumer protection; and enhancing risk protection, social safety nets, and the agriculture and the micro, small, and medium enterprises financing ecosystem.

The contents of this document are for reference purposes only. Some of the information comes from public sources and this may not be comprehensive, accurate or up to date; where we have relied on third party information and sources, this has not been verified by us. The document does not constitute legal advice, and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication, and any facts in this document should be checked for your specific circumstances at the time you wish to use or refer to them.