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MAS proposes bond seasoning framework for retail investors

Under this proposed framework, retail investors will be able to purchase bonds initially offered by eligible issuers to institutional and accredited investors, after these bonds have been listed for six months.

SINGAPORE: The Monetary Authority of Singapore (MAS) released a consultation paper on Monday (Sep 1) on proposals to make it easier for retail investors to buy bonds.

In the document, MAS noted that Singapore dollar-denominated corporate debt issued from 2010 to 2013 stood at an aggregate of S$107.3 billion. However, only S$970 million worth of bonds was offered to retail investors from 2010 to date.

MAS said corporate issuers have mainly targeted institutional and accredited investors in offerings of debentures such as corporate bonds, and few issuers have tapped the retail market to meet their funding needs.

MAS however observed that there has been growing interest in retail bond offerings in recent years. It is proposing a bond seasoning framework, where retail investors will be able to purchase bonds initially offered by eligible issuers to institutional and accredited investors, after these bonds have been listed for six months.

Under the proposal, these issuers will be able to sell additional bonds to retail investors, without issuing a prospectus, under the same terms as the seasoned bonds.

The central bank has also identified areas in its regulatory regime that could be streamlined to make it easier for corporates to make bond offerings to retail investors, while maintaining sufficient safeguards.

Currently, any offer of securities to retail investors must be accompanied by a prospectus registered by MAS. The central bank proposes refining the current prospectus requirements for offers of plain vanilla bonds made by issuers who meet certain eligibility criteria, such as a listing track record and strong credit profile.

However, to protect retail investors, MAS said the scope of the proposed prospectus exemptions will be confined to plain vanilla unsubordinated bonds with a maximum tenor of 10 years. Issuers will also be required to provide retail investors with key information relating to the features and risks of the bonds for the offers exempted from prospectus requirements.

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