Singapore Looks To Make REIT Sector More Attractive; Tightens Rules On Precious Metals, Stones Dealers

Tom Burroughes

13 October 2014

Singapore’s central bank and regulator has set out how to boost the city-state’s real estate investment trust sector, while it has also introduced a reporting regime for trade in precious stones and metals to thwart criminals.

Late last week, the published a consultation paper on a set of proposals for the REIT market. They are designed to make the sector more open and increase the appeal to investors.

Singapore’s regulatory regime for REITs, set up in 1999, was last reviewed in 2007, and since then, the jurisdiction now has one of the largest REIT markets in Asia, the MAS said.

Proposals would impose a statutory duty on the REIT manager and its director to prioritise the interests of REIT investors over those of the REIT manager and its shareholders, in the event of a conflict of interest. REIT managers’ performance fees will be base bsed on a methodology that primarily takes into account the long-term interests of REIT investors. The development limit of a REIT will be increased from 10 per cent to 25 per cent of its deposited property. In addition, the leverage limit imposed on REITs will rise from 35 per cent to 45 per cent of the REIT’s total assets, while the provision for REITs with credit ratings to leverage up to 60 per cent, will be removed.

Among other proposals, a REIT manager can provide more comprehensive disclosure to REIT investors by including in the annual reports, items such as the amount of income support payments received by the REIT; more information on the lease expiry profile and refinancing needs of the REIT; and its remuneration policy for directors and executive officers, and their remuneration.

Precious transfers
In a separate announcement, Singapore will put in place a cash transaction reporting regime for precious stones and metals dealers with effect from 15 October.

“Precious stones and metals are portable, highly valuable, and can be easily bought and sold. These characteristics make it easier for criminals (including terrorists) to exploit them to launder their illicit funds. Criminals are also known to use funds obtained from their illegal activity to buy precious commodities and subsequently convert them back to cash. Such precious commodities could also be used directly to support criminal activities. The risk increases when the transaction is conducted in cash where it is more difficult to trace the origin of the funds,” the MAS said.

The Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act was amended in Parliament in July to enable this reporting requirement.

Dealers must file a cash transaction report with the Suspicious Transaction Reporting Office of the Commercial Affairs Department within 15 business days when they conduct any cash transaction exceeding S$20,000, or its equivalent in foreign currency, which involves precious stones, metals or products; dealers must also determine the identity of the customer and enquire if the customer was acting on behalf of a third party and if so, determine the identity of the third party who owns the cash; they must record the details of each cash transaction and maintain such records for a period of five years from the date of submission of the CTR; and put in place internal controls to prevent the financing of terrorism and proliferation.