Jurisdiction - Singapore
Reports and Analysis
Singapore – Proposed Amendments To The SFA And FAA Regulations.

3 January, 2013

 

Legal News & Analysis – Asia Pacific – Singapore – Corporate/M&A

 

Introduction

 

The Monetary Authority of Singapore (MAS) has proposed changes to the regulations of the Securities and Futures Act (SFA) and Financial Advisers Act (FAA) to expand the application of certain market conduct provisions, strengthened record-keeping for internet transactions, tighten business conduct rules and require greater disclosure of information in offer documents. A public consultation was conducted from 6 December 2012 to 4 January 2013 on the proposed amendments. We summarise the key proposed changes below:

 

  • Expanding the Application of Market Conduct Provisions

The Securities and Futures (Licensing and Conduct of Business) Regulations (SF(LCB) Regulations) presently imposes duties on the Chief Executive Officers (CEO) and directors of a capital markets service (CMS) licence holder to ensure effective controls and segregation of duties to minimise any conflicts of interest that may arise. Control failures are often not solely attributable to CEOs and directors. Accordingly, collective responsibility is imposed on the CMS licence holder together with its directors and senior management for the execution of risk management and compliance functions. The proposed amendments seek to extend such duties to the CMS licence holders themselves.

 

Similar amendments are also proposed by MAS in respect of the Financial Advisers Regulations (FAR). The prescribed duties of CEOs and directors are proposed to be extended to the financial adviser licence holders themselves.

 

  • Strengthening Record Keeping for Internet-based Transactions

 

SF(LCB) Regulations currently require financial institutions dealing in securities, trading in futures contracts and carrying out leveraged foreign exchange trading to maintain certain written records upon receiving a customer’s order, such as records of the particulars of the customer’s instructions and the time of receipt of the order. The proposed amendments seek to enhance the level of record keeping in respect of orders made over internet-based trading platforms by requiring the recording and maintaining of the internet protocol (IP) address from which orders are received.

 

  • Narrowing the Exemption from the Requirement to Hold a CMS Licence for the Provision of Fund Management Services

 

Presently, an individual is exempted from holding a CMS licence for providing fund management services under the SF(LCB) Regulations if these services are being provided to a “connected person”. The definition of a “connected person” captures (i) a range of immediate family members (for the full and exhaustive list, please see the definition of “connected person” in the SFA) or (ii) a firm or corporation in which the individual or any of the aforementioned immediate family members controls, whether individually or jointly, 20% or more of the voting power.

 

The exemption is intended to capture individuals managing funds on behalf of their immediate family members. It was not intended to be used to exempt individuals conducting fund management services on behalf of non-family members who hold less than 80% stake, whether individually or jointly, in a firm or corporation described in the above paragraph.

 

The proposed amendments therefore seek to refine the language used in the SF(LCB) Regulations so as to more accurately reflect legislative intention. The definition of “connected person” should be limited to a firm or corporation in which the individual or the immediate family member, whether individually or jointly, has sole control, as opposed to merely having to control 20% or more of total voting power. 

 

  • Enhancing Disclosures Relating to an Offer of Asset-backed Securities

 

The Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations (SF(OIS)(SD) Regulations) sets out the disclosures that need to made in the prospectus for an offer of asset-backed securities. The proposed amendments seek to enhance the disclosures that are required in respect of underlying assets which are relevant to the investment decisions made by investors, such as disclosure of any form of due diligence (including any review, verification or assessment in relation to underlying assets undertaken by the issuer, sponsor, originator, underwriter or any third party) and disclosure of the use of derivative contracts.

 

 

 For further information, please contact:

 
Wai Ming YAP, Partner, Stamford Law
waiming.yap@stamfordlaw.com.sg
 

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