SINGAPORE Law and Practice Contributed by: Lee Xin Mei, Cheryl Tan, Eugene Lee and Benjamin Liew, Rajah & Tann Singapore LLP
4.11 Activities Avoided by SPEs or Other Securitisation Entities The business undertaken by SPEs is usually restricted in the transaction documents and in the constitution of the company. Typically, the securitisation transaction will be structured in such manner that the SPE does not require any licences in order to carry on the transaction. Please note that this does not apply to Special Purpose Reinsurance Vehicles, which fall out - side the scope of this guide. There is no regime under Singapore law com - parable to the US Investment Company Act of 1940. 4.12 Participation of Government- Sponsored Entities In Singapore, government-sponsored entities have issued notes to finance the purchase of securitised assets, which includes project and infrastructure loans and infrastructure asset- backed securities. Government-sponsored entities are also not prohibited from participating as investors in the securitisation market. There are no particular laws or regulations in Sin - gapore that will apply differently to the govern - ment-sponsored entities (whether as issuer or investor) as compared with other regular partici - pants in the securitisation market in Singapore. Such entities remain subject to regulations appli - cable to other entities that are not government sponsored. 4.13 Entities Investing in Securitisation Typically, securitisation investors include finan - cial institutions, insurance companies and pri - vate funds. Such entities are usually licensed
and already subject to the applicable regulations and licence conditions. 4.14 Other Principal Laws and Regulations The key principal laws and regulations are dis - cussed in 1.3 Applicable Laws and Regulations . 5. Synthetic Securitisation 5.1 Synthetic Securitisation Regulation and Structure Synthetic securitisations are not prohibited under Singapore law, although these are not common in the Singapore market. Such securitisations must comply with the regulatory requirements which similarly apply to traditional securitisa - tions, including, if applicable, regulatory capital requirements under MAS Notice 637. In the context of a financial institution, such deals are structured to enable it to achieve a reduction of the amount of regulatory capital it is required to retain. This involves the transfer of the credit risk of the financial institution’s assets to investors while retaining the assets on its bal - ance sheet. 6. Structurally Embedded Laws of General Application 6.1 Insolvency Laws Securitisation transactions in Singapore are typi - cally structured to be insolvency remote in order to, among other reasons, obtain better credit rat - ings and pricing terms. To achieve this, insol - vency laws will need to enable such a structure, such that the underlying assets of the securitisa - tion are insulated from any risk of insolvency of the originator/seller of the assets, and to ensure
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