New Bills

Securities and Futures Bill (B33/2001)
On 5 October 2001, the Securities and Futures Bill 2001 was presented for its third reading and then passed in Parliament.

The proposed Securities and Futures Act 2001 ('the SFA') will consolidate a number of existing statutes which regulate the operation of Singapore's capital markets, namely the Securities Industry Act (Cap 289) ('the SIA'), the Futures Trading Act (Cap 116) ('the FTA'), the capital raising provisions contained in the Companies Act (Cap 50) ('the CA') and a number of provisions in the Exchanges (Demutualisation and Merger) Act (Cap 99B) ('the EDMA'). It will also introduce new provisions.

The impetus for change behind the SFA has been the introduction of a number of major policy reforms, the aims of which are as follows:

• The introduction of a modular, single licensing regime for securities and futures intermediaries.
• The introduction of Recognised Trading System Providers ('ReTS' Providers) to facilitate the regulation of Alternative Trading Systems and Overseas Stock and Futures Exchanges.
• The transfer of corporate fund-raising provisions from the CA into the SFA and a fine-tuning of these provisions.
• Making continuous disclosure of material information by listed companies and notification by holders of substantial shareholdings and changes to SGX legal obligations.
• The transfer of unit trust provisions from the CA into the SFA and fine-tuning of these provisions.
• The introduction of an information-connected test for insider trading.
• Extending the civil fines and civil remedy provisions (presently applicable only to insider trading) to other forms of market misconduct (eg market rigging or employment of fraud).

Financial Advisers Bill 2001 (B34/2001)
On 5 October 2001, the Financial Advisers Bill 2001 was presented for its third reading and then passed in Parliament.

The proposed Financial Advisers Act 2001 ('FAA') will govern financial advisory activities in respect of a range of investment products and the distribution and marketing of life insurance policies and unit trusts.

The FAA will streamline the laws governing the provision of financial advisory services in respect of securities, futures and life insurance products into a single legislation. The new proposed Act will provide a more flexible and integrated regulatory framework for entities engaging in financial advisory activities. Having a set of requirements and regulations, that is applicable for all market intermediaries engaging in financial advisory services, will help maintain consistent professional standards across the industry.

The FAA defines financial advisory services as:

• advising others, either directly or through publications or writings, concerning investment products (including securities, futures and life insurance policies), other than advising on corporate finance;
• issuing or promulgating analyses or reports concerning investment products; or
• marketing of collective investment schemes or arranging of contracts in respect of life policies or both.

Persons who engage in one or more of these activities need hold only one licence under the FAA, and a licensed financial adviser will be able to add to the range of products on which it gives advice or activities it engages in without the need for an additional licence. The FAA will grant exemptions from licensing to banks, merchant banks, securities firms, fund management companies, finance companies, insurance companies and insurance brokers, but such exempted entities and their employees have to meet business conduct and qualification requirements prescribed pursuant to the FAA.

Contracts (Rights of Third Parties) Bill 2001 (B36/2001)
The Contracts (Rights of Third Parties) Bill 2001 ('the Bill') seeks to make provisions for the enforcement of contractual terms by third parties. The Bill reforms the rule of privity of contract under which a person can only enforce a contract if he is a party to it. The Bill will reform the rights or benefits, but not the duties or burden, aspect of the privity doctrine. The Bill also reforms the rule that consideration must move from the promisee insofar as it relates to the third party's right to enforce a contract under the Bill. The Bill, by its terms, does not affect the position of joint promisees.

It is stated in the Explanatory Statement to the Bill that although the Bill does not make the third party a party to the contract, the right of the third party to enforce the contract under the Bill is analogous to a contractual right (for example, the third party can assign the benefits of the contract to another person).

The Bill will apply to contracts made more than 6 months after the commencement of the Bill. The Bill will apply to contracts made within 6 months of the commencement of the Bill only if the contract expressly provides for the application of the Bill.

Right of enforcement by third party

Under the proposed s 2, a person who is not a party to a contract (hereinafter referred to as a third party) may, in his own right, enforce a term of the contract only in the two situations outlined below:

1. where the contract expressly provides that he may; or
2. where the term purports to confer a benefit on him, unless it appears from a proper construction of the contract that the parties did not intend the term to be enforceable by the third party.

The third party must be expressly identified in the contract by name, as a member of a class or as answering a particular description, but need not be in existence when the contract is entered into. This allows contracting parties to confer enforceable rights on, for example, an unborn child or a future spouse or a company that is to be incorporated.

The third party's right of enforcement is subject to the terms and conditions of the contract, for example, it is open to the parties to limit or place conditions on the third party's right.

For the purpose of exercising his right to enforce a term of the contract, the third party may avail himself of any remedy that would have been available to him in an action for breach of contract if he had been a party to the contract, and the rules relating to damages, injunctions, specific performance and other remedies shall apply accordingly. Such remedies will not be refused on the ground that, as against the promisor, the third party is a volunteer.

It is also clear that the Bill will apply to enable a third party to take advantage of an exclusion or limitation clause in the contract. Where a term of a contract excludes or limits liability in relation to any matter, references in the Bill to the third party enforcing the term shall be construed as references to his availing himself of the exclusion or limitation.

Variation and rescission of contract

Where a third party has a right under the Bill to enforce a term of the contract, the contracting parties may not by agreement, rescind or vary the contract in such a way as to extinguish or alter the third party's entitlement under that right, without his consent if:

• the third party has communicated his assent to the term to the promisor;
• the promisor is aware that the third party has relied on the term (whether or not the third party has knowledge of its precise terms); or
• the promisor can reasonably be expected to have foreseen that the third party would rely on the term and the third party has in fact relied on it (whether or not the third party has knowledge of its precise terms).

However, the restriction against variation and rescission is subject to an express term of the contract, that the contract can by agreement be rescinded or varied without the third party's consent or that the third party's consent is to be required in specified circumstances different to those which are set out in the Bill.

Protection of promisor from double liability

Where the promisee has recovered damages (or an agreed sum) from the promisor in respect of either the third party's loss or the promisee's expense in making good that loss, the court or arbitral tribunal will reduce any award to the third party enforcing a term under the Bill to take account of the sum already recovered by the promisee.

Existing rights of third parties

The Bill will not affect any existing right or remedy of a third party. The Bill also applies the standard limitation periods for actions for breach of contract in s 6 of the Limitation Act (Cap 163) to actions by third parties under the Bill. It is also stated that a third party shall not, by virtue of the Bill, be treated as a party to the contract for the purposes of any other written law.

Excepted contracts

When effective as law, the Bill will not have effect on the following types of contracts:

• negotiable instruments;
• a contract under s 39(1) of the Companies Act (Cap 50) (pertaining to the contract between a company and its members by virtue of the memorandum and articles of the company);
• the enforcement of any term of a contract of employment against an employee; and
• (a) a contract for the carriage of goods by sea, or (b) a contract for the carriage of goods by rail or road or for the carriage of cargo by air, which is subject to the rules of the appropriate international transport convention.

Insurance (Amendment) Bill 2001 (B35/2001)
The Insurance (Amendment) Bill 2001 amends the Insurance Act (Cap 142) in the following respects:

1. to permit the Monetary Authority of Singapore ('the MAS') by regulations to establish any foreign insurer scheme to permit any class, society or association of foreign insurers specified in the scheme to carry on insurance business in Singapore and to make related amendments to the Societies Act (Cap 311).
2. to make consequential amendments arising from the FAA and the repeal of the Insurance Intermediaries Act (Cap 142A) ('the IIA'), in particular, to provide for the regulation of insurance agents, direct general insurance brokers and all reinsurance brokers under the Act which are currently regulated under the IIA (life insurance brokers regulated under the IIA will, however, be regulated under the FAA);
3. to revise the penalties for offences under the Act. In this regard, a new s 55A is inserted to provide that where a company or body corporate is convicted of an offence under the Act or any regulations made thereunder (other than an offence consisting in the breach of a duty imposed only on companies and bodies corporate), the penalty that the court may impose is a fine not exceeding 2 times the maximum amount that the court could, but for the section, impose as a fine for the offence; and
4. to make miscellaneous amendments for the better administration of the Act.
   

Legal Profession (Amendment) Bill 2001 (B39/2001)
This Bill amends the Legal Profession Act (Cap 161) for the following main purposes:

• to require pupils to keep dining terms before their admission as advocates and solicitors;
• to enable a law lecturer of the National University of Singapore or of any department of law in any other institution of higher learning or a State Counsel, Deputy Public Prosecutor or other legal officer of the government of any country to appear and plead in courts in certain circumstances;
• to limit the offence under s 33(3) (of placing the services of an advocate and solicitor at the disposal of another person) to acts done for or in expectation of any fee, gain or reward;
• to extend the exemption in s 34(h) (relating to a law lecturer of the Law Faculty of the National University of Singapore rendering any opinion or acting in an advisory capacity) to other law lecturers of other departments of the National University of Singapore and the law departments of other institutions of higher learning and to limit the exemption to matters in which the law lecturer has been instructed by an advocate and solicitor;
• to empower the Council of the Law Society ('the Council') to appoint not more than 3 advocates and solicitors to sit on the Council;
• to exempt an advocate and solicitor from compulsory voting in elections to the Council if he satisfies the Registrar of the Supreme Court that he was not in Singapore at the time of the election;
• to constitute one or more Review Committees (consisting of an advocate and solicitor and a legal officer) to review complaints or information against solicitors and to dismiss complaints which are frivolous, vexatious, misconceived or lacking in substance; and
• to empower the Law Society to intervene in a solicitor's practice where the Council is satisfied that a sole solicitor has abandoned his practice or that a solicitor has practised without a practising certificate in force.

Elizabeth Wong
Allen & Gledhill