Introduction

With an SGX-listed entity, a successful takeover is a means for a party (whether existing shareholder or not) to obtain control (referred to as the offeror). The conduct of the takeover is a highly regulated activity and is principally governed by the Singapore Code on Take-overs and Mergers (Code), issued by the Securities Industry Council of Singapore (SIC). The Code regulates not only the offeror, but also parties that are “acting in concert” with the offeror. It is typical for the offeror to appoint a financial adviser to advice on strategy, pricing and execution and the financial adviser will be regarded as a party that is so acting in concert.

Impact of takeovers on financial advisers in a large financial group

Where the financial adviser is a part of a large financial group, it is common for the financial adviser to make an application to the SIC to exempt the other members of the financial group (that have no involvement in the particular takeover activity, and whom also exercises separate autonomy from the financial adviser) from similarly being regarded as “acting in concert”. This application is made at the outset of the takeover and exemption is single use and applicable only to that takeover.

Without such an exemption, past and present activity of such other member of the financial group that are regarded as “acting in concert” will have implications on the takeover. For example,

• any purchases (in the past or during the conduct of the takeover) by such members of the financial group might impact the price at which the takeover is conducted; and
• sales of any securities in the target company are generally restricted, except in certain circumstances.

The “Exempt Fund Manager” regime and its implications for financial advisers

On 1 May 2018, the SIC introduced an “Exempt Fund Manager” regime whereby such a financial adviser will not need to make ad-hoc applications when advising on each takeover; instead, the financial adviser is invited to make an initial application, for exemption, for its other members of the financial group and if granted the exemption can be renewed annually (subject to conditions). Indeed, the initial application can (and is typically) made when the financial adviser is not currently mandated on a takeover, and is in anticipation of a busy year ahead filled with takeover mandates.

This exemption regime is particularly useful where the other members of the financial group comprise, inter alia, independently operated wealth management and trading arms. It should be said that having been so exempted, a trading arm of the financial group can still participate in the active and deliberate execution of the takeover – just that in so participating, it will no longer fall within the protection of the exemption and will then be regarded as “acting in concert”.

Scope of the exemption regime and its benefits

Under the “Exempt Fund Manager” regime, the SIC may grant exempt status to fund managers that are regarded as “acting in concert” for a period of time. Such exempt status is granted in recognition of the fact that certain dealing activities are carried out separately from, and are not influenced by, the corporate finance operations of the financial adviser. Once exempt, an exempt fund manager will not normally be regarded as acting in concert with the client of the financial adviser, provided that the sole reason for the connection with an offeror or offeree company is that the exempt fund manager is in the same group as the financial adviser.

For exempt fund managers, their exempt status applies to all discretionary dealings in client funds managed by the exempt fund manager. Where dealings by an exempt fund manager fall outside the scope of this exemption (e.g., non-discretionary dealings), such an exempt fund manager will not benefit from its exempt status and will continue to be regarded as “acting in concert” in relation to such dealings.

Notwithstanding their exempt status, it should also be noted that exempt fund managers would still have to disclose, either publicly or privately, to the SIC, its dealings in relevant securities in accordance with Rule 12 of the Code.

Please feel free to contact us should you have any queries on this exemption regime.