TRUSTEES (AMENDMENT) BILL

Order for Second Reading read. 4.50 pm

The Minister for Law (Prof. S. Jayakumar): Mr Speaker,Sir, I beg to move, "That the Bill be now read a Second time."

Sir, this is a very short and technical Bill to amend section 4(1) of the Trustees Act to enable a trustee to invest in negotiable certificates of deposits (NCDs) in Singapore currency where such NCDs are issued by banks in Singapore. An NCD is evidence of a deposit with a bank repayable on a fixed date. What distinguishes it from a bank deposit is that it is a fully negotiable document and can be resold before the maturity date. In this respect, it has an advantage over normal fixed deposit with a bank. As an investment, an NCD denominated in Singapore dollars carries less risk than equities which are quoted on the Stock Exchange since upon maturity the principal sum plus interest is payable.

This amendment is needed because at present section 4 of the Trustees Act only empowers trustees to invest in immovable property and in Government and other fixed interest securities, whilst section 7 covers securities quoted on the Stock Exchange of Singapore. An NCD does not specifically fall within either section 4 or section 7, and unless the trust instrument expressly authorises the trustees to invest in NCDs, there is a doubt as to whether NCDs are authorised investments. This Bill will remove any doubt that the trustees can invest in Singapore dollar denominated NCDs in accordance with the provisions of the Trustees Act. The amendment will also benefit those statutory bodies, such as Town Councils, which are empowered to invest in trustee investments in accordance with the Trustees Act.

Finally, Sir, I should acknowledge the contribution made towards this legislation by Mr Heng Chiang Meng, who is also Chairman of the Cheng San Town Council; it was he who first brought to Government's attention this difficulty which Town Councils had in investing their funds.

This does not mean that there are no other aspects of the Trustees Act which require a relook; it is being reviewed to see whether other amendments are necessary. But as that review may take some time, I therefore commend this amendment to this House now.

Sir, I beg to move.

Question proposed.

Mr Heng Chiang Meng: Sir, first, I would like to thank the Minister for Law for his speedy response to my request. This surely will give the Town Councils and other bodies, whose investment portfolios are controlled by the Trustees Act, greater scope in their investment decisions.

Sir, although the Minister has indicated that there will be a further review of the Trustees Act, I would just like, hopefully, to hasten that review by reminding him that the purpose of this Act is primarily to provide a measure of prudence and safety to the investments of bodies who control funds, not their own funds but funds of their constituents. Traditionally, the highest rating of the investments in terms of safety are Government papers such as bonds and Treasury Bills. Next comes fixed deposits, and of course now NCDs, with banks. And the last on the list would be stocks and shares on the Exchange as well as immovable property.

Sir, since the last review, the financial markets in Singapore have undergone tremendous improvements and changes. There are now available many types of papers, many types of investible instruments which I would consider to be safer and more prudent than some of the instruments permissible under the Act. For example, there are investible papers such as trade bills. These are bills arising out of trade by Singapore traders and they are in fact endorsed, similar to being guaranteed, by banks and other financial institutions supervised by the MAS. Surely, I would consider such instruments to have a higher safety rating than those instruments such as stocks and shares on the stock market.

Sir, I would like to make a plea to the Minister. Could he try to complete this review as soon as possible so as to give those of us who have to operate on shoe-string budgets some scope for better returns on their investments?

Prof. Jayakumar: Mr Speaker, Sir, I thank the Member and also take note of his point. As I said, the matter will be reviewed. Obviously, it is not solely a legal consideration. The Ministry of Law will have to consult the Ministry of Finance and other agencies like the MAS, to suitable amendments to be made, consistent of course with the basic underlying purpose of the Trustees Act which is to ensure that the interests of the beneficiaries are never lost sight of.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Prof. S. Jayakumar].

Bill considered in Committee; reported without amendment; read a Third time and passed.