Law of Investement & Financial Markets

Hey LFM students,

This is my first post on the subject. Please do not confuse yourselves with the Commercial Law post - which you would be happy to have cleared.

Ben has completed lectures 1 - 4 and I will be taking over 5 - 11 and 12 as revision. Its important that you keep abreast of the progress of the lectures because even though it will be an open book exam - the test is really your efforts in thinking of the many issues which we would have introduced to you over the 12 week period. The task is to think and analyze the topics that we have covered.

Lecture 1 -4 had you thinking of the financial markets and the importance of the the FM to our economy. In 2009 MTI estimates that Financial Services will account for 13.5% of our GDP estimated at about S$256b. So the regulation of this sector is crucial to our economy. Any set backs in terms of poorly regulated financial products or poorly regulated financial services will severely affect our economy and ultimately the country.

So I hope you will think about the reasons for regulations and the manner in which the laws of our respective countries are attempting to regulate this important sector of our economy. The regulations made have been both a statutory efforts as well as the prevailing common laws of negligence, contract and trust. The statutory efforts of both Australia and Singapore has also focused on the alternative resolution efforts in the form of mediation and alternative dispute resolution centers as well as promoting internal resolution.

In Lecture 5 - we introduced to you a kind of financial product known as Managed Investments Schemes. (MIS) In Singapore we refer to these schemes as the Collective Investment Schemes. These schemes allow a collective effort by groups of people to pool their resources to professional and trusted entities to managed their resources to achieve financial gains. An example would be Unit Trust. Unit Trust has been extremely robust in the Singapore Financial markets offering investors a huge array of products from Tech Stocks to Property Stocks to REITS.

MIS or CIS however has a potential risk in that it depends largely on the fundamental principle of "trust". In this sense the investor trusts their monies with a central entity to manage their monies for them. If this central entity (known as the Responsible Entity) is not trustworthy, the investors may be at risk. So rather than leaving it to market forces to determine this, the laws have taken to regulating this segment.

You will therefore be required to think about -

1) What is a trust and why and how has the common law dealt with this issues;

2) What is a MIS - how is it defined and why is it defined like this;

3) Who is the Responsible Entity - what qualities does her posses and why?

4) What are the registration requirements and why do you think these are required.

5) What is the MIS is not registered?


Its really about regulating MIS. MIS is important - we need it and at the same time we need to regulate it. Do you think however that our laws have done enough or too much in their regulating efforts?

Hope you enjoyed it and continue to think about it. In our next lecture we will be looking at the issues of raising funds and I look forward to some exciting stories of lending and guarantees.

Have a good week. Please let me have your comments or questions if any.

SK