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.
Insurance Authority and HKMA publish supervisory standards and requirements on use of premium financing in taking out life insurance policies
The Insurance Authority and the Hong Kong Monetary Authority (HKMA) have jointly announced supervisory standards and requirements related to the use of premium financing for taking out life insurance policies, which will take effect on 1 January 2023. The important facts statement – premium financing (IFS-PF), amongst others, will be introduced to promote disclosure and facilitate potential policy holders’ making of informed decisions when they use premium financing. In light of the growing popularity amongst policy holders of using premium financing for wealth and liquidity management, the IFS-PF sets out the factors to be considered and the risks involved in relation to premium financing. Insurance intermediaries will be required to explain fully to their customers the contents of the IFS-PF as soon as they become aware of the customers’ interest in the use of premium financing after making sufficient enquiries. The customers concerned will be required to complete and sign the IFS-PF for every new insurance policy application involving premium financing.
HKEX announces first carbon futures ETF listing
The Hong Kong Exchanges and Clearing Limited (HKEX) has announced the listing of the first carbon futures exchange traded fund (ETF) – the CICC Carbon Futures ETF. This ETF extends the coverage of Hong Kong-listed commodity ETFs to carbon credits, which is an important asset class in the global drive to achieve carbon neutrality. The HKEX considers the launch will open up new investment opportunities in the reduction of carbon emissions. Further, increasing investor awareness has driven strong asset growth in Hong Kong-listed environmental, social and governance (ESG) ETFs. In 2021, the market capitalisation of ESG ETFs increased by 84% in 2021 to HK$4.5 billion by year-end, while their average daily turnover registered HK$40.9 million in 2021, more than double that of 2020.
HKEX announces first SPAC listing
The HKEX has announced the first special purpose acquisition company (SPAC) listing in Hong Kong, with Aquila Acquisition Corporation debuting on the Main Board. HKEX introduced the SPAC listing regime in Hong Kong in January 2022. There has been a strong market in this new listing route, with ten SPAC listing applications received as at 17 March 2022. The Hong Kong SPAC listing regime focuses on welcoming SPAC listing applications from experienced and reputable SPAC promoters seeking good quality de-SPAC targets, providing another attractive route to listing in Hong Kong while ensuring appropriate investor safeguards.
SGX and OCBC Bank launch low carbon index tracking Singapore’s largest companies
Singapore Exchange (SGX) and Oversea-Chinese Banking Corporation (OCBC) have jointly launched the iEdge-OCBC Singapore Low Carbon Select 50 Capped Index (Index), tracking the top 50 Singapore or globally-listed companies domiciled or incorporated in Singapore to provide investors with the opportunity to reduce the carbon footprint of their investment portfolios. Developed by SGX as part of its expanding Sustainability Indices product suite in collaboration with product specialists from OCBC, the Index uses an exclusionary methodology to remove companies with heavy involvement in the fossil fuels sector, while upholding best-in-class selections based on Scope 1 and Scope 2 greenhouse gas emissions per unit of revenue. The resulting top 50 companies by market capitalisation will constitute the index with capped weighting to ensure portfolio diversification. Environmental and carbon intensity data are sourced from Sustainalytics, a responsible investment research firm specialised in environmental, social and governance.
RBI amends Payment and Settlement Systems Regulations
The Reserve Bank of India (RBI) has announced the amendments to regulation 5, regulation 6 (2) and the schedule to regulation 5 of the Payment and Settlement Systems Regulations, 2008 (PSS Regulations). The RBI has discontinued certain monthly / quarterly / annual returns prescribed in sub-regulations (a) to (g) of regulation 6 (2) and removed redundant operational guidelines listed in the schedule to regulation 5. The amendments are carried out with the objective of reducing the compliance burden on Regulated Entities by rationalising certain returns prescribed in the PSS Regulations.
BNM launches MYOR-i to spur Islamic financial product innovation
Bank Negara Malaysia (BNM) has announced the launch of the Malaysia Islamic Overnight Rate (MYOR-i), replacing the Kuala Lumpur Islamic Reference Rate. BNM explains that the introduction of MYOR-i is intended to spur the development of innovative Shariah-compliant financial products to further deepen Malaysia’s Islamic financial market. BNM adds that it will also reinforce a holistic Shariah-compliant ecosystem and enhance best market practices and standards.
SCM registers IEO operators
The Securities Commission Malaysia (SCM) has announced that it has registered two Initial Exchange Offering (IEO) operators to promote responsible innovation in the digital assets space. The registered IEO operators will provide an alternative avenue for eligible companies to raise funds by issuing digital tokens in Malaysia. An issuer may raise funds up to RM100 million from retail and more sophisticated investors, subject to the limits provided in the SCM’s Guidelines on Digital Assets. Prior to hosting the issuer’s digital token on their platform, the IEOs will carry out assessments to verify the issuer’s digital value proposition, review the issuer’s proposal and disclosures made in its disclosure document, and undertake comprehensive due diligence on the issuer and its token offering.
SECT consults on mutual fund advertising
The Securities and Exchange Commission, Thailand (SECT) has commenced a consultation on draft regulations for advertising and sales promotion of mutual funds. The draft revised regulations are part of the SECT’s Regulatory Guillotine, which aims to revise the existing rules to be more efficient, in line with the current business landscape, and more flexible for business operators while maintaining investor protection. In particular, SECT is proposing to waive the communication of mutual funds’ specific warnings for advertising broadcasts via television, radio or other channels which have limitation on commercial time allowed. It also proposes to remove the rules in detail on sales promotion of mutual funds, as the business operators still have to comply with the existing principle-based regulations as well as the Notice on Sales Promotion of Mutual Funds issued by the Association of Investment Management Companies. Feedback is requested by 27 April 2022.
BoT summarises feedback and next steps on repositioning financial sector for a sustainable digital economy
The Bank of Thailand (BoT) has reported on the outcome of its public consultation on repositioning Thailand’s financial sector. Recommendations and comments include the BoT should provide clear and timely guidelines on its policy directions for striking a balance between promoting innovation and managing risks amidst the transition to the digital economy and sustainable growth, ensure there is comprehensive risk management to address associated risks and unintended consequences, and facilitate businesses and households to adapt and manage transition towards a sustainable digital economy as a national agenda with appropriate incentives. The BoT plans to incorporate the feedback and recommendations received, and will consult on the engagement of banking groups in digital business, the payment system, managing the transition towards greater environmental sustainability, and the virtual bank licensing framework by the second quarter of 2022. A further consultation on the open banking policy will follow in the third quarter of 2022.
BSP issues reporting guidelines for Islamic banking transactions
The Bangko Sentral ng Pilipinas (BSP) has announced its approval of the prudential reporting framework for Islamic Banks (IBs) and Islamic Banking Units (IBUs). The framework sets the accounting treatment for common Islamic banking arrangements. In particular, it requires an IBU to segregate its books and records from those of its parent conventional bank for transparency and to ensure the transactions of the IBU are conducted in a manner that meets Shariah requirements. The BSP advises that an observation period on the submission of the reports of IBs and IBUs will commence from the reporting period of end-June 2022 until 31 December 2023 with full implementation on 31 March 2024.
BSP encourages Filipinos to save for retirement through PERA
The BSP has encouraged Filipinos to take full advantage of the benefits offered under the Personal Equity and Retirement Account (PERA), stressing its tax benefits. The Governor of the BSP noted that digitalisation of PERA has enabled Filipinos at home and abroad to open accounts, invest in different PERA products, and access their PERA investments at any time using mobile devices, whilst significantly reducing processing time and transaction cost. The BSP will collaborate with various stakeholders such as industry organizations and advocacy groups to expand the PERA 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.